WSBF's Q3 Earnings Soar 73% Y/Y on Higher Loan Yield, Stock up 5%

Core Insights - Waterstone Financial, Inc. (WSBF) shares increased by 5% following the earnings report for Q3 2025, outperforming the S&P 500's 2.9% growth during the same period [1] - The company reported a net income of $7.9 million, a 67.6% increase from $4.7 million in the same quarter last year [2] - Net interest income rose to $14.7 million, reflecting a 28% year-over-year gain [2] Financial Performance - Earnings per share reached 45 cents, a substantial increase of 73.1% from 26 cents per share a year ago [2] - Return on average assets (ROAA) improved to 1.4% from 0.8% year-over-year [3] - Return on average equity (ROAE) increased to 9.1% from 5.6% in the prior-year quarter [3] - Book value per share rose to $18.65 from $17.53 at year-end 2024 [3] Asset Quality - Nonperforming assets as a percentage of total assets slightly increased to 0.27% from 0.25% year-over-year [4] - Past due loans as a percentage of total loans decreased to 0.5% from 0.6% a year earlier [4] Segment Performance Community Banking - Pre-tax income in the Community Banking segment was $8.4 million, a 49.4% increase from $5.6 million in Q3 2024 [5] - Net interest income in this segment rose 19.3% year-over-year to $14.6 million, driven by improved yields on loans and lower cost of funds [5] - The net interest margin expanded to 2.76% from 2.13% in the same period last year [5] - The segment recorded a negative provision for credit losses of $0.1 million, indicating continued credit strength [6] - Efficiency ratio improved to 48.9% from 60.4% in the prior-year quarter [6] Mortgage Banking - Mortgage Banking generated pre-tax income of $1.3 million, up from $0.1 million in the prior-year quarter [7] - Loan originations declined by 3.5% to $539.4 million, but improved gross margins on loans sold and reduced compensation costs boosted profitability [7] - Non-interest income in this segment slightly decreased to $21 million from $21.4 million [7] Management Commentary - CEO William Bruss attributed strong quarterly results to enhanced net interest margin and ongoing asset quality strength [8] - Both Community and Mortgage Banking segments contributed to year-over-year earnings improvement [8] - The increase in book value per share was due to robust earnings, share repurchases, and favorable valuation adjustments [8] Factors Influencing Results - Positive net income growth was driven by higher interest income on loans, margin expansion, and controlled operating expenses [9] - A lower cost of borrowings and deposits enhanced the net interest margin [9] - Mortgage operations benefited from tighter expense management and slightly higher loan sale margins [10] - Community banking saw strength in deposit growth and interest income [10] Other Developments - During the quarter, the company repurchased approximately 270,000 shares at a cost of $3.8 million, contributing to a 61-cent increase in book value per share [11] - The company declared a quarterly dividend of 15 cents per share [11]