New Waterstone(WSBF) - 2025 Q2 - Quarterly Results

Executive Summary & Consolidated Overview 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) 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 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] - Community Banking segment grew net interest income by $2.4 million YoY, primarily due to improved cost of funds[2] - Mortgage Banking segment recorded pre-tax income as seasonal loan origination volumes expanded and professional fees normalized[2] - Book value per share increased through strong earnings and an active share repurchase program[2] Consolidated Highlights 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] - 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] 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 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 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] 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 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] - Purchase activity accounted for 91.7% of originations in Q2 2025, compared to 92.7% in Q2 2024[6] Company Information and Disclosures 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. 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] - 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] - The company supports financial and homeownership goals with a commitment to innovation, integrity, and community service[8] Forward-Looking Statements 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] - 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] - Readers are cautioned not to place undue reliance on these statements, which reflect beliefs only as of the press release date[10] Non-GAAP Financial Measures 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] - Investors may use non-GAAP measures to analyze financial performance without the impact of unusual items or events[11] - 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] Consolidated Financial Statements 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 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 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 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) 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) 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 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 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% |