Core Insights - Waterstone Financial, Inc. reported a net income of $7.9 million, or $0.45 per diluted share, for the quarter ended September 30, 2025, representing a significant increase from $4.7 million, or $0.26 per diluted share, for the same quarter in 2024 [1][4][17] - The company achieved a consolidated return on average assets of 1.42% and a return on average equity of 9.14% for the quarter ended September 30, 2025, compared to 0.83% and 5.55% respectively for the same quarter in 2024 [4][18] - The Community Banking segment saw a 19.3% increase in net interest income, totaling $14.6 million for the quarter, driven by improved loan yields and reduced funding costs [2][4][21] Financial Performance - Consolidated net income increased by $3.2 million, or 68.1%, from the previous year [4] - Pre-tax income for the quarter was $8.4 million, a 49.4% increase compared to $5.6 million for the same quarter in 2024 [4][17] - The company repurchased approximately 270,000 shares at a cost of $3.8 million, increasing book value per share by $0.07 during the quarter [4][10] Asset Quality - Nonperforming assets as a percentage of total assets decreased to 0.27% at September 30, 2025, down from 0.25% a year earlier [4][18] - Past due loans as a percentage of total loans improved to 0.50% from 0.63% year-over-year [4][18] Community Banking Segment - The Community Banking segment's net interest income rose by $2.4 million, or 19.3%, compared to the same quarter in 2024 [2][21] - The efficiency ratio improved to 48.94% for the quarter, down from 60.35% in the same quarter of the previous year [10][21] Mortgage Banking Segment - The Mortgage Banking segment recorded a second consecutive quarter of pre-tax income, attributed to effective expense management and improved margins [2][23] - Mortgage banking non-interest income decreased by $401,000, or 1.9%, to $21.0 million compared to the same quarter in 2024 [10][23]

Financial Performance - Waterstone Financial, Inc. reported net income of $7.9 million, or $0.45 per diluted share, for Q3 2025, a 73.1% increase compared to $4.7 million, or $0.26 per diluted share, for Q3 2024[1] - Net income for Q3 2025 was $7,926,000, representing a 67.5% increase compared to $4,728,000 in Q3 2024[11] - Basic earnings per share increased to $0.45 in Q3 2025, up from $0.26 in Q3 2024[11] Income and Revenue - Total interest income for Q3 2025 was $29,556,000, an increase of 1.25% from $29,191,000 in Q3 2024[11] - Net interest income after provision for credit losses rose to $15,008,000 in Q3 2025, up 26.4% from $11,894,000 in Q3 2024[11] - Noninterest income totaled $22,302,000 in Q3 2025, slightly down from $22,552,000 in Q3 2024[11] Asset and Deposit Growth - Total assets as of September 30, 2025, were $2,269,169,000, compared to $2,209,608,000 as of December 31, 2024[13] - Total deposits increased to $1,385,973,000 as of September 30, 2025, from $1,359,897,000 at the end of 2024[13] - Average core retail deposits increased by $65.4 million, or 5.2%, to $1.31 billion for Q3 2025 compared to $1.25 billion for Q3 2024[4] Efficiency and Returns - Consolidated return on average assets was 1.42% for Q3 2025, up from 0.83% for Q3 2024, while return on average equity increased to 9.14% from 5.55%[3] - The efficiency ratio improved to 48.94% for Q3 2025, down from 60.35% for Q3 2024[4] - The allowance for credit losses on loans was $17,670,000 as of September 30, 2025, down from $18,247,000 at the end of 2024[13] Community Banking Segment - The Community Banking segment achieved a net interest income growth of $2.4 million, or 19.3%, totaling $14.6 million for Q3 2025 compared to $12.3 million for Q3 2024[3] - Net income for the Community Banking segment rose to $6,916,000 in September 2025, an increase from $6,220,000 in June 2025, marking a growth of 11.19%[18] - The efficiency ratio for the Community Banking segment improved to 48.94% in September 2025, down from 50.40% in June 2025, indicating enhanced operational efficiency[18] Mortgage Banking Segment - The Mortgage Banking segment recorded pre-tax income of $1.3 million for Q3 2025, compared to $144,000 for Q3 2024[4] - Loan originations in the Mortgage Banking segment totaled $539,404,000 in September 2025, down from $588,838,000 in June 2025, reflecting a decrease of 8.45%[20] - The gross margin on loans sold in the Mortgage Banking segment was 3.87% in September 2025, slightly up from 3.84% in June 2025[20] Nonperforming Assets - Nonperforming assets as a percentage of total assets decreased to 0.27% at September 30, 2025, down from 0.37% at June 30, 2025, and 0.25% at September 30, 2024[3] Other Financial Metrics - Book value per share increased to $18.65 at September 30, 2025, up from $17.53 at December 31, 2024[3] - Total noninterest income for the Community Banking segment was $1,359,000 in September 2025, compared to $1,686,000 in June 2025, reflecting a decrease of 19.39%[18] - The efficiency ratio for the Mortgage Banking segment was 93.66% in September 2025, compared to 91.15% in June 2025, indicating a decline in efficiency[20]

Core Insights - The article highlights recent research reports on major stocks including Tesla, UnitedHealth, Shopify, and Waterstone Financial, emphasizing their performance and market conditions [2][5][8][11][14]. Tesla, Inc. (TSLA) - Tesla's shares have outperformed the Zacks Automotive - Domestic industry over the past year, with a gain of 85.4% compared to the industry's 72.9% [5]. - The company is facing challenges with declining EV sales, recording its first annual decline in deliveries in 2024, which has continued into 2025 [5][6]. - Operating margins are shrinking, and expenses are rising, with Musk indicating that upcoming quarters may be difficult [6]. - The Energy Generation & Storage unit remains a strength, and the expansion of the Supercharger network is ongoing [6]. - Tesla has launched a robotaxi service, which has received mixed reactions, but the company sees potential for significant cost and scalability advantages [7]. UnitedHealth Group Inc. (UNH) - UnitedHealth's shares have underperformed the Zacks Medical - HMOs industry over the past year, declining by 37% compared to the industry's 31.3% [8]. - The company is experiencing cost pressures, higher medical utilization, and a significant debt burden, which threaten margin stability [8]. - The Medical Care Ratio (MCR) is expected to increase to 89.4% in 2025, and the earnings outlook for 2025 has been trimmed [8]. - Despite challenges, UnitedHealth benefits from balanced growth across its segments, driven by rising healthcare demand and disciplined execution [9][10]. Shopify Inc. (SHOP) - Shopify's shares have outperformed the Zacks Internet - Services industry over the past year, with a gain of 99.2% compared to the industry's 51% [11]. - The company is expanding its merchant base through new tools and AI-driven solutions, enhancing customer engagement and operational efficiency [11][12]. - Shopify's international growth, particularly in Europe, is a key catalyst for its prospects [12]. - However, the company faces gross margin pressure due to increased hosting costs and a new paid trial program, which may impact operating profit [13]. Waterstone Financial, Inc. (WSBF) - Waterstone Financial's shares have outperformed the Zacks Financial - Savings and Loan industry over the past year, with a gain of 14.9% compared to the industry's 10.9% [14]. - The company demonstrated earnings resilience with a 35.2% year-over-year net income growth in Q2 2025, despite challenges in mortgage banking [14]. - Improved return on assets (ROA) and return on equity (ROE) indicate enhanced profitability driven by cost discipline [14]. - The Community Banking segment showed robust income growth, although mortgage banking remains a drag due to declining originations and rising non-accruals [15][16].

Core Viewpoint - Waterstone Financial, Inc. has been upgraded from a "Neutral" to an "Outperform" rating, indicating strength in strategic direction and financial fundamentals, following a positive assessment of its second-quarter 2025 performance [1] Catalysts Behind the Upgrade - The mortgage banking segment reported a net income of $1.5 million in Q2 2025, up from $1.3 million in the same period last year, reflecting improved cost control and pricing strategies [2] - Core banking operations showed solid performance with net interest income increasing to $13.7 million and net interest margin improving to 2.60%, up from 2.01% a year earlier, due to prudent asset-liability management [3] Shareholder Returns - The company declared a regular quarterly cash dividend of 15 cents per share and repurchased shares, demonstrating a commitment to enhancing shareholder returns and a disciplined capital allocation strategy [4] Ongoing Challenges - Noninterest income declined to $24.3 million in Q2 2025 from $26.5 million in Q2 2024, primarily due to lower mortgage banking income, which could limit earnings diversification [5] - Loan growth remained sluggish, indicating cautious lending behavior or soft demand, which may constrain future earnings growth if economic conditions do not improve [6] Conclusion - The upgrade reflects optimism regarding Waterstone Financial's operational stability, mortgage recovery, and capital return strategy, while ongoing challenges such as weak noninterest income and limited loan growth warrant close monitoring [7]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited consolidated financial statements and management's financial analysis [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including key financial statements and detailed notes [Consolidated Statements of Financial Condition](index=3&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) This statement details the company's financial position, with total assets increasing by **$47.0 million (2.1%)** | Metric | June 30, 2025 (In Thousands) | December 31, 2024 (In Thousands) | Change (In Thousands) | % Change | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total Assets | $2,256,560 | $2,209,608 | $46,952 | 2.1% | | Cash and cash equivalents | $70,923 | $39,761 | $31,162 | 78.4% | | Securities available for sale | $218,757 | $208,549 | $10,208 | 4.9% | | Loans held for sale | $161,826 | $135,909 | $25,917 | 19.1% | | Loans receivable, net | $1,646,473 | $1,662,329 | $(15,856) | (1.0)% | | Total Liabilities | $1,915,069 | $1,870,473 | $44,596 | 2.4% | | Total Deposits | $1,384,707 | $1,359,897 | $24,810 | 1.8% | | Total Borrowings | $465,726 | $446,519 | $19,207 | 4.3% | | Total Shareholders' Equity | $341,491 | $339,135 | $2,356 | 0.7% | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Net income increased for both periods ended June 30, 2025, driven by higher net interest income and negative credit loss provision | Metric (In Thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | :--------------------------- | :--------------------------- | :----- | :------- | | Total interest income | $28,685 | $28,020 | $665 | 2.4% | $56,440 | $54,925 | $1,515 | 2.8% | | Total interest expense| $14,977 | $17,341 | $(2,364)| (13.6)% | $30,156 | $33,109 | $(2,953)| (8.9)% | | Net interest income | $13,708 | $10,679 | $3,029 | 28.4% | $26,284 | $21,816 | $4,468 | 20.5% | | Provision (credit) for credit losses | $(9) | $(225) | $216 | (96.0)% | $(567) | $(158) | $(409) | 258.9% | | Total noninterest income | $24,329 | $26,497 | $(2,168)| (8.2)% | $41,426 | $47,745 | $(6,319)| (13.2)% | | Total noninterest expenses | $28,377 | $30,259 | $(1,882)| (6.2)% | $54,727 | $57,809 | $(3,082)| (5.3)% | | Net income | $7,727 | $5,712 | $2,015 | 35.3% | $10,763 | $8,750 | $2,013 | 23.0% | | Basic EPS | $0.43 | $0.31 | $0.12 | 38.7% | $0.59 | $0.47 | $0.12 | 25.5% | | Diluted EPS | $0.43 | $0.31 | $0.12 | 38.7% | $0.59 | $0.47 | $0.12 | 25.5% | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income significantly increased for both periods ended June 30, 2025, due to net unrealized holding gains on available-for-sale securities | Metric (In Thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net income | $7,727 | $5,712 | $2,015 | 35.3% | $10,763 | $8,750 | $2,013 | 23.0% | | Net unrealized holding gain (loss) on AFS securities, net of tax | $1,146 | $(654) | $1,800 | (275.2)% | $3,494 | $(1,923) | $5,417 | (281.7)% | | Comprehensive income | $8,873 | $5,058 | $3,815 | 75.4% | $14,257 | $6,827 | $7,430 | 108.8% | [Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity increased by **$2.4 million** to **$341.5 million** at June 30, 2025, driven by comprehensive income | Metric (In Thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------- | :------------ | :---------------- | :----- | :------- | | Total Shareholders' Equity | $341,491 | $339,135 | $2,356 | 0.7% | | Net income (6 months) | $10,763 | $8,750 | $2,013 | 23.0% | | Other comprehensive income (6 months) | $3,494 | $(1,923) | $5,417 | (281.7)% | | Cash dividend (6 months) | $(5,381) | $(5,578) | $197 | (3.5)% | | Purchase of common stock returned to authorized but unissued (6 months) | $(9,667) | $(11,116) | $1,449 | (13.0)% | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents increased by **$31.2 million** for the six months ended June 30, 2025, despite decreased operating cash flow | Metric (In Thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net cash used in operating activities | $(11,705) | $(49,456) | $37,751| (76.3)% | | Net cash provided by (used in) investing activities | $10,440 | $(14,225) | $24,665| (173.4)% | | Net cash provided by financing activities | $32,427 | $68,576 | $(36,149)| (52.7)% | | Increase in cash and cash equivalents | $31,162 | $4,895 | $26,267| 536.6% | | Cash and cash equivalents at end of period | $70,923 | $41,316 | $29,607| 71.6% | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on accounting policies, financial instruments, loan portfolio, regulatory capital

Core Insights - Waterstone Financial, Inc. reported a significant increase in earnings per share (EPS) for Q2 2025, rising to 43 cents from 31 cents in Q2 2024, marking a 39% increase [2] - The company's net income for the quarter was $7.7 million, up from $5.7 million in the same period last year [3] - The net interest margin improved to 2.60%, up from 2.01% year-over-year, indicating better yields on interest-earning assets [4] Financial Performance - Revenue from net interest income increased to $13.7 million from $10.9 million year-over-year, while noninterest income decreased to $24.3 million from $26.5 million [2] - Total assets as of June 30, 2025, were $2.22 billion, slightly up from $2.21 billion at the end of 2024 [4] - The loan portfolio saw a decline, with loans receivable at $1.64 billion, down from $1.7 billion in December 2024 [4] Shareholder Actions - The company repurchased approximately 508,000 shares at an average cost of $12.80 per share, increasing book value per share to $18.19 from $17.53 [5] - Dividends declared remained steady at 15 cents per share [5] Management Commentary - The CEO highlighted strong earnings performance, particularly in the community banking segment, which saw a 50.4% increase in pre-tax income to $7.6 million [6] - The community banking segment's growth was attributed to a $2.4 million increase in net interest income and effective expense management [6] Mortgage Banking Insights - Mortgage originations declined by 7.1% year-over-year to $588.8 million, with purchase originations making up 91.7% of the total [7] - Noninterest income from mortgage banking fell by 9.7% to $22.6 million, while gross margin on loans sold decreased to 3.8% from 3.9% [7] - Compensation and employee benefits expenses decreased by 3.4%, aiding earnings despite a decline in mortgage revenue [7]

Core Insights - Waterstone Financial, Inc. reported a net income of $7.7 million, or $0.43 per diluted share, for the quarter ended June 30, 2025, compared to $5.7 million, or $0.31 per diluted share, for the same quarter in 2024 [1][3] - The company achieved its highest quarterly earnings per share since December 31, 2021, driven by growth in net interest income and strong asset quality [2][3] - The Community Banking segment saw a $2.4 million increase in net interest income, primarily due to improved cost of funds [2][3] - The Mortgage Banking segment recorded pre-tax income as seasonal loan origination volumes expanded [2][3] Financial Performance - Consolidated net income for the quarter was $7.7 million, a 35.1% increase from $5.7 million in the same quarter of 2024 [3][12] - Return on average assets (annualized) improved to 1.39% from 1.02% year-over-year [3][16] - Return on average equity (annualized) increased to 9.04% from 6.84% year-over-year [3][16] - Dividends declared were $0.15 per common share [3][16] - Book value per share rose to $18.19 from $17.53 at the end of 2024 [3][14] Asset Quality - Nonperforming assets as a percentage of total assets was 0.37% at June 30, 2025, compared to 0.25% at June 30, 2024 [3][17] - Past due loans as a percentage of total loans was 0.69% at June 30, 2025, down from 0.76% at June 30, 2024 [3][17] - The company experienced minimal loan loss activity, resulting in releases from the allowance for credit losses [2][3] Community Banking Segment - Net interest income for the Community Banking segment was $13.6 million, a 21.4% increase from $11.2 million in the same quarter of 2024 [3][12] - Average loans held for investment totaled $1.67 billion, a slight decrease of 0.1% year-over-year [3][12] - Net interest margin increased to 2.60% from 2.01% year-over-year [3][12] Mortgage Banking Segment - Loan originations decreased by $45.3 million, or 7.1%, to $588.8 million compared to $634.1 million in the same quarter of 2024 [9][22] - Mortgage banking non-interest income decreased by $2.4 million, or 9.7%, to $22.6 million [9][22] - Gross margin on loans sold was 3.84%, down from 3.93% in the same quarter of 2024 [9][22]

[Executive Summary & Consolidated Overview](index=1&type=section&id=1.%20Executive%20Summary%20%26%20Consolidated%20Overview) Waterstone Financial, Inc. reported strong Q2 and YTD 2025 financial growth, marked by increased net income, diluted EPS, and improved profitability ratios, alongside strategic share repurchases and stable asset quality [Overall Financial Performance (Q2 and Six Months Ended June 30, 2025)](index=1&type=section&id=1.1.%20Overall%20Financial%20Performance%20(Q2%20and%20Six%20Months%20Ended%20June%2030,%202025)) Waterstone Financial, Inc. reported increased net income and diluted EPS for both the second quarter and the first six months of 2025 compared to the same periods in 2024, indicating strong financial growth **Consolidated Net Income and Diluted EPS (Q2 and Six Months Ended June 30):** | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :-------------------- | :------ | :------ | :-------------- | :-------------- | | Net Income (in millions) | $7.7 | $5.7 | $10.763 | $8.750 | | Diluted EPS | $0.43 | $0.31 | $0.59 | $0.47 | [CEO Commentary](index=1&type=section&id=1.2.%20CEO%20Commentary) CEO William Bruss expressed satisfaction with the quarter's performance, noting the highest quarterly EPS since Q4 2021. He highlighted growth in Community Banking's net interest income due to improved cost of funds, strong asset quality, and pre-tax income in Mortgage Banking as origination volumes expanded and legal settlement fees normalized. The company also increased book value per share through earnings and share repurchases - Achieved **highest quarterly earnings per share** since the quarter ended December 31, 2021[2](index=2&type=chunk) - Community Banking segment grew net interest income by **$2.4 million** YoY, primarily due to improved cost of funds[2](index=2&type=chunk) - Mortgage Banking segment recorded pre-tax income as seasonal loan origination volumes expanded and professional fees normalized[2](index=2&type=chunk) - Book value per share increased through strong earnings and an active share repurchase program[2](index=2&type=chunk) [Consolidated Highlights](index=1&type=section&id=1.3.%20Consolidated%20Highlights) The company demonstrated strong consolidated financial performance in Q2 2025, with significant increases in net income, return on average assets, and return on average equity year-over-year. Book value per share also improved, supported by share repurchases, while asset quality metrics showed slight changes **Consolidated Financial Performance (Q2 YoY Change):** | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------------- | :------ | :------ | :----- | | Net Income (in millions) | $7.7 | $5.7 | +$2.0 (+35.1%) | | Return on average assets (annualized) | 1.39% | 1.02% | +37 bps | | Return on average equity (annualized) | 9.04% | 6.84% | +220 bps | - Dividends declared during Q2 2025 totaled **$0.15 per common share**[4](index=4&type=chunk) - Repurchased approximately **508,000 shares** at a cost of **$6.5 million** (**$12.80 per share**), increasing book value by approximately **$0.14** during Q2 2025[4](index=4&type=chunk) **Asset Quality Ratios (Consolidated):** | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------- | :------------ | | Nonperforming assets as % of total assets | 0.37% | 0.35% | 0.25% | | Past due loans as % of total loans | 0.69% | 0.67% | 0.76% | [Segment Performance Review](index=1&type=section&id=2.%20Segment%20Performance%20Review) The company's segments showed varied performance, with Community Banking achieving significant income growth and improved net interest margin, while Mortgage Banking maintained pre-tax income despite lower originations [Community Banking Segment Highlights](index=1&type=section&id=2.1.%20Community%20Banking%20Segment%20Highlights) The Community Banking segment reported a substantial increase in pre-tax income and net interest income for Q2 2025, driven by an improved net interest margin. Average loans held for investment saw a slight decrease, primarily due to single-family mortgages, while past due loans remained managed **Community Banking Segment Financial Performance (Q2 YoY Change):** | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Change | | :------------------------ | :-------------------- | :-------------------- | :----- | | Pre-tax income | $7.6 | $5.1 | +$2.5 (+49.0%) | | Net interest income | $13.6 | $11.2 | +$2.4 (+21.4%) | | Net interest margin | 2.60% | 2.01% | +59 bps | - Average loans held for investment decreased by **$1.5 million** (**0.1%**) YoY to **$1.67 billion** in Q2 2025, primarily due to a decrease in single-family mortgages offset by increases in commercial real estate and multi-family mortgages[4](index=4&type=chunk) **Community Banking Segment Past Due Loans:** | Metric | June 30, 2025 (in millions) | March 31, 2025 (in millions) | June 30, 2024 (in millions) | | :---------------------- | :-------------------------- | :--------------------------- | :-------------------------- | | Past due loans | $8.9 | $7.6 | $9.3 | [Mortgage Banking Segment Highlights](index=2&type=section&id=2.2.%20Mortgage%20Banking%20Segment%20Highlights) The Mortgage Banking segment maintained pre-tax income at $2.0 million for Q2 2025, consistent with the prior year, despite a decrease in loan originations and non-interest income. The segment improved its efficiency ratio and saw an increase in average core retail deposits **Mortgage Banking Segment Financial Performance (Q2 YoY Change):** | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Change | | :-------------------------------- | :-------------------- | :-------------------- | :------- | | Pre-tax income | $2.0 | $2.0 | $0.0 (0.0%) | | Loan originations | $588.8 | $634.1 | -$45.3 (-7.1%) | | Mortgage banking non-interest income | $22.6 | $25.1 | -$2.5 (-9.7%) | | Efficiency ratio | 50.40% | 62.37% | -1197 bps | | Gross margin on loans sold | 3.84% | 3.93% | -9 bps | - Average core retail deposits increased by **$91.7 million** (**7.5%**) YoY to **$1.31 billion** in Q2 2025, primarily due to increases in checking, money market, and certificates of deposit balances[6](index=6&type=chunk) - Purchase activity accounted for **91.7%** of originations in Q2 2025, compared to **92.7%** in Q2 2024[6](index=6&type=chunk) [Company Information and Disclosures](index=3&type=section&id=3.%20Company%20Information%20and%20Disclosures) This section provides an overview of Waterstone Financial, Inc.'s structure and operations, along with important disclosures regarding forward-looking statements and the use of non-GAAP financial measures [About Waterstone Financial, Inc.](index=3&type=section&id=3.1.%20About%20Waterstone%20Financial,%20Inc.) Waterstone Financial, Inc. is a savings and loan holding company for WaterStone Bank, a community-focused financial institution operating 14 branches in southeastern Wisconsin. It also owns WaterStone Mortgage Corporation, a national lender licensed in 48 states, committed to innovation, integrity, and community service - Waterstone Financial, Inc. is the holding company for WaterStone Bank, established in **1921**, with **14 branch locations** in southeastern Wisconsin[7](index=7&type=chunk) - WaterStone Bank offers personal and business banking products and is the parent company of WaterStone Mortgage Corporation, a national lender licensed in **48 states**[7](index=7&type=chunk) - The company supports financial and homeownership goals with a commitment to innovation, integrity, and community service[8](index=8&type=chunk) [Forward-Looking Statements](index=3&type=section&id=3.2.%20Forward-Looking%20Statements) This section serves as a cautionary statement regarding forward-looking information in the press release, emphasizing that actual results may differ materially due to various risks and uncertainties, including changes in interest rates, market demand, competition, regulations, and economic conditions. Readers are advised not to place undue reliance on these statements - The press release contains forward-looking statements subject to risks and uncertainties under the Private Securities Litigation Reform Act of 1995[10](index=10&type=chunk) - Actual results may differ materially due to factors such as changes in interest rates, demand, competition, banking regulation, tax laws, technological advances, and economic conditions[10](index=10&type=chunk) - Readers are cautioned not to place undue reliance on these statements, which reflect beliefs only as of the press release date[10](index=10&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=3.3.%20Non-GAAP%20Financial%20Measures) Management uses non-GAAP financial measures to provide a clearer understanding of ongoing operations and enhance comparability with prior periods, believing investors may find them useful for analyzing performance without the impact of unusual items. However, these measures are supplementary to GAAP results and may have limitations regarding appropriateness of items or calculation differences across companies - Management uses non-GAAP financial information to provide a greater understanding of ongoing operations and enhance comparability of results with prior periods[11](index=11&type=chunk) - Investors may use non-GAAP measures to analyze financial performance without the impact of unusual items or events[11](index=11&type=chunk) - Non-GAAP data is supplementary to GAAP results and not a substitute; limitations include potential disagreements on items and differing calculation methods across companies[11](index=11&type=chunk) [Consolidated Financial Statements](index=4&type=section&id=4.%20Consolidated%20Financial%20Statements) This section presents the consolidated statements of income and financial condition, highlighting significant increases in net income, total assets, and deposits for Q2 2025 [Consolidated Statements of Income](index=4&type=section&id=4.1.%20Consolidated%20Statements%20of%20Income) The consolidated statements of income show a significant increase in net interest income and net income for both the three and six months ended June 30, 2025, compared to the prior year. This was primarily driven by higher interest income and a decrease in total interest expense, despite a reduction in noninterest income **Consolidated Statements of Income (Three Months Ended June 30, in thousands):** | Metric | 2025 | 2024 | Change | | :--------------------------------------- | :----- | :----- | :----- | | Total interest income | $28,685 | $28,020 | +$665 | | Total interest expense | $14,977 | $17,341 | -$2,364 | | Net interest income | $13,708 | $10,679 | +$3,029 | | Total noninterest income | $24,329 | $26,497 | -$2,168 | | Total noninterest expenses | $28,377 | $30,259 | -$1,882 | | Net income | $7,727 | $5,712 | +$2,015 | | Diluted EPS | $0.43 | $0.31 | +$0.12 | **Consolidated Statements of Income (Six Months Ended June 30, in thousands):** | Metric | 2025 | 2024 | Change | | :--------------------------------------- | :----- | :----- | :----- | | Total interest income | $56,440 | $54,925 | +$1,515 | | Total interest expense | $30,156 | $33,109 | -$2,953 | | Net interest income | $26,284 | $21,816 | +$4,468 | | Total noninterest income | $41,426 | $47,745 | -$6,319 | | Total noninterest expenses | $54,727 | $57,809 | -$3,082 | | Net income | $10,763 | $8,750 | +$2,013 | | Diluted EPS | $0.59 | $0.47 | +$0.12 | [Consolidated Statements of Financial Condition](index=5&type=section&id=4.2.%20Consolidated%20Statements%20of%20Financial%20Condition) As of June 30, 2025, Waterstone Financial, Inc. reported an increase in total assets and total deposits compared to December 31, 2024. Cash and cash equivalents significantly rose, while loans receivable slightly decreased. Total shareholders' equity also saw a modest increase **Consolidated Statements of Financial Condition (As of June 30, 2025 vs. December 31, 2024, in thousands):** | Metric | June 30, 2025 | December 31, 2024 | Change | | :--------------------------------------- | :------------ | :---------------- | :----- | | Total assets | $2,256,560 | $2,209,608 | +$46,952 | | Cash and cash equivalents | $70,923 | $39,761 | +$31,162 | | Loans receivable, net | $1,646,473 | $1,662,329 | -$15,856 | | Total deposits | $1,384,707 | $1,359,897 | +$24,810 | | Total liabilities | $1,915,069 | $1,870,473 | +$44,596 | | Total shareholders' equity | $341,491 | $339,135 | +$2,356 | | Book value per share | $18.19 | $17.53 | +$0.66 | [Supplementary Financial Data](index=6&type=section&id=5.%20Supplementary%20Financial%20Data) This section provides detailed supplementary financial data, including consolidated and segment-specific quarterly performance, average balances, and yield/cost analyses, illustrating key trends and ratios [Summary of Key Quarterly Financial Data (Consolidated)](index=6&type=section&id=5.1.%20Summary%20of%20Key%20Quarterly%20Financial%20Data%20(Consolidated)) Consolidated quarterly data shows a positive trend in net interest income and net income, with Q2 2025 marking the highest net income in the past five quarters. Performance ratios like ROAA and ROAE also improved significantly quarter-over-quarter and year-over-year, while asset quality ratios remained relatively stable **Condensed Results of Operations (Consolidated, in thousands):** | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :-------------------------- | :------ | :------ | :------ | :------ | :------ | | Net interest income | $13,708 | $12,576 | $12,835 | $11,517 | $10,679 | | Net income | $7,727 | $3,036 | $5,210 | $4,728 | $5,712 | | Income per share – diluted | $0.43 | $0.17 | $0.28 | $0.26 | $0.31 | **Performance Ratios (Consolidated, annualized):** | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :-------------------------- | :------ | :------ | :------ | :------ | :------ | | Return on average assets - QTD | 1.39% | 0.57% | 0.94% | 0.83% | 1.02% | | Return on average equity - QTD | 9.04% | 3.61% | 6.05% | 5.55% | 6.84% | | Net interest margin - QTD | 2.60% | 2.47% | 2.42% | 2.13% | 2.01% | **Asset Quality Ratios (Consolidated):** | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :--------------------------------------- | :------ | :------ | :------ | :------ | :------ | | Past due loans to total loans | 0.69% | 0.67% | 0.95% | 0.63% | 0.76% | | Nonperforming assets to total assets | 0.37% | 0.35% | 0.28% | 0.25% | 0.25% | | Allowance for credit losses - loans to loans receivable | 1.07% | 1.08% | 1.09% | 1.07% | 1.10% | [Summary of Quarterly Average Balances and Yield/Costs (Consolidated)](index=7&type=section&id=5.2.%20Summary%20of%20Quarterly%20Average%20Balances%20and%20Yield/Costs%20(Consolidated)) The consolidated average balances show an increase in total interest-earning assets and total interest-bearing deposits in Q2 2025 compared to the previous quarter. The total interest-earning assets yield slightly decreased QoQ, while the total interest-bearing liabilities cost also decreased, contributing to an improved net interest margin **Average Balances (Consolidated, in thousands):** | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------------- | :-------- | :-------- | :-------- | | Total interest-earning assets | $2,116,995 | $2,062,568 | $2,139,495 | | Total interest-bearing deposits | $1,313,539 | $1,303,792 | $1,143,035 | | Borrowings | $437,784 | $397,053 | $622,771 | | Total interest-bearing liabilities | $1,751,323 | $1,700,845 | $1,765,806 | **Average Yield/Costs (Consolidated, annualized):** | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--------------------------------------- | :------ | :------ | :------ | | Loans receivable and held for sale yield | 5.73% | 5.75% | 5.54% | | Total interest-earning assets yield | 5.43% | 5.46% | 5.27% | | Total interest-bearing deposits cost | 3.35% | 3.52% | 3.42% | | Borrowings cost | 3.67% | 3.93% | 4.92% | | Total interest-bearing liabilities cost | 3.43% | 3.62% | 3.95% | [Community Banking Segment Summary of Key Quarterly Financial Data](index=8&type=section&id=5.3.%20Community%20Banking%20Segment%20Summary%20of%20Key%20Quarterly%20Financial%20Data) The Community Banking segment showed consistent growth in net interest income and net income over the past five quarters, with Q2 2025 reporting the highest figures. The efficiency ratio significantly improved both quarter-over-quarter and year-over-year **Community Banking Segment Condensed Results of Operations (in thousands):** | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :-------------------------- | :------ | :------ | :------ | :------ | :------ | | Net interest income | $13,640 | $12,403 | $12,886 | $12,250 | $11,234 | | Net income | $6,220 | $4,638 | $5,288 | $4,705 | $4,349 | **Community Banking Segment Efficiency Ratio (non-GAAP):** | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------- | :------ | :------ | :------ | | Efficiency ratio - QTD | 50.40% | 59.66% | 62.37% | [Mortgage Banking Segment Summary of Key Quarterly Financial Data](index=9&type=section&id=5.4.%20Mortgage%20Banking%20Segment%20Summary%20of%20Key%20Quarterly%20Financial%20Data) The Mortgage Banking segment reported a positive net income in Q2 2025, recovering from a loss in Q1 2025, and showing an improvement compared to Q2 2024. Loan originations decreased year-over-year but increased significantly quarter-over-quarter, with purchase activity remaining dominant. The efficiency ratio improved QoQ and YoY **Mortgage Banking Segment Condensed Results of Operations (in thousands):** | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :--------------------------------------- | :------ | :-------- | :------ | :---- | :------ | | Net income | $1,468 | $(1,625) | $(197) | $(50) | $1,313 | | (Loss) income before income taxes (benefit) expense | $1,999 | $(2,213) | $(625) | $144 | $1,997 | **Mortgage Banking Segment Loan Originations (in thousands):** | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :---------------------- | :-------- | :-------- | :-------- | | Loan originations | $588,838 | $387,729 | $634,109 | | Purchase % | 91.7% | 87.5% | 92.7% | | Refinance % | 8.3% | 12.5% | 7.3% | **Mortgage Banking Segment Efficiency Ratio (non-GAAP) and Gross Margin:** | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------------- | :------ | :-------- | :------ | | Efficiency ratio - QTD | 91.15% | 114.18% | 91.64% | | Gross margin on loans sold | 3.84% | 3.98% | 3.93% |

Core Viewpoint - Zacks Investment Research has initiated coverage of Waterstone Financial, Inc. (WSBF) with a Neutral recommendation, indicating a balanced outlook for the company despite its capital strength and earnings stability, due to several risk factors and operational inefficiencies limiting near-term upside potential [1] Financial Strength - Waterstone's financial foundation is robust, with a Common Equity Tier 1 (CET1) capital ratio of 20.32% and a Total Capital Ratio of 21.40% as of March 2025, significantly exceeding regulatory minimums [2] - The company offers a consistent dividend yield of 4.4%, above the industry average, with the most recent quarterly dividend of 15 cents per share declared in June [2] Performance Metrics - Improvements in net interest margin from 2.15% in Q1 2024 to 2.47% in Q1 2025 reflect effective asset-liability management and lower borrowing costs [3] - Interest-earning asset yields rose to 5.46%, while reliance on higher-cost Federal Home Loan Bank borrowings has significantly declined [3] Liquidity Position - As of March 31, 2025, Waterstone holds $43.3 million in cash and has $377 million in unused FHLB borrowing capacity, indicating a strong liquidity position [4] - The deposit base continues to expand, particularly in time deposits, providing flexibility in funding and pricing strategies [4] Challenges - The Mortgage Banking segment reported a $1.6 million loss in Q1, reversing a profit from the same period last year, driven by a 20% decline in loan originations [5] - The company has $21.8 million in unrealized losses on its securities portfolio, primarily in government-sponsored mortgage-backed securities, which could impact book value if interest rates rise [5] Credit Quality - Substandard commercial real estate loans are elevated at $11.9 million, with collateral-dependent loans rising sharply to $17.5 million, indicating potential pressure in the CRE segment [6] - Nonaccrual loans increased to $7.4 million, highlighting concerns regarding credit quality trends [6] Market Sentiment - Waterstone's share price has underperformed compared to peers and the broader market, reflecting tepid investor sentiment [7] - Trading multiples suggest the stock is not overvalued but do not indicate a compelling discount, with the market pricing in a stable but limited growth trajectory [7]

Core Insights - Waterstone Financial, Inc. has elected Molly Mulroy and Laura Piotrowski to its Board of Directors, effective July 22, 2025 [1][2] Group 1: Board Members' Backgrounds - Molly Mulroy is currently the Executive Vice President and Chief Administrative Officer of WEC Energy Group, overseeing various departments including Human Resources and IT Services [2][3] - Mulroy has held multiple leadership roles since joining WEC Energy Group in 1999, including Vice President and Chief Information Officer [3] - Laura Piotrowski is the CEO and President of Cavendish Vernal, a strategic advisory firm she founded in 2017, and has previously held senior finance roles [5][6] Group 2: Educational and Community Involvement - Mulroy holds a bachelor's degree from the University of Minnesota and an MBA from the University of Chicago, and is active in the Milwaukee community [4] - Piotrowski earned her bachelor's degree from the University of Wisconsin-Milwaukee and an Executive MBA from Marquette University, and is a Certified Public Accountant [7] Group 3: Company Overview - Waterstone Financial, Inc. is the savings and loan holding company for WaterStone Bank, which was established in 1921 and operates 14 branch locations in southeastern Wisconsin [8] - WaterStone Bank offers a comprehensive suite of personal and business banking products and is also the parent company of WaterStone Mortgage Corporation, a national lender licensed in 48 states [8][9]