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 Data and Key Metrics Changes - Adjusted total revenues reached $43.5 million, an increase of 30% over the second quarter [5] - Net interest income increased over 8% compared to the linked quarter and was up 40% compared to the third quarter of 2023 [6] - Net interest margin on a fully tax-equivalent basis increased 8 basis points to 2.12% [6][14] - The company reported a net loss of $41.6 million, or $0.476 per diluted share, with an adjusted net loss of $12.5 million, or $1.43 per diluted share [13] Business Line Data and Key Metrics Changes - The gain on sale of SBA loans generated $10.6 million in revenue, rebounding strongly in the third quarter [10] - Commercial loan balances were up $115 million, or 3.2%, while total loan balances increased by $105 million, or 2.4% [8] - Total revenue from fintech initiatives was up 14% compared to the second quarter and up 130% from the third quarter of 2024 [12] Market Data and Key Metrics Changes - Total delinquencies were 35 basis points as of September 30, down from 62 basis points in the second quarter [7] - Non-performing loans totaled $53.3 million at the end of the third quarter, up $9.7 million from the linked quarter [19] - The allowance for credit losses increased to $59.9 million, up $13.4 million, or almost 30% from the second quarter [20] Company Strategy and Development Direction - The company executed strategic actions that had a near-term negative impact on earnings but strengthened its financial position for future growth [6] - The focus remains on enhancing net interest margin and achieving a 1% return on average assets [7] - The company is exploring fintech opportunities and leasing opportunities that yield higher returns compared to previous investments [75] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the credit outlook, indicating that delinquencies are trending down and the worst may be behind them [30][33] - The company anticipates loan balances to increase at an unannualized rate of 4% to 6% in the fourth quarter [23] - The macro environment remains uncertain, but customer activity is stabilizing, and lending teams are performing well [80] Other Important Information - The company completed the sale of $837 million of single-tenant lease financing loans, which had a net loss of $37.8 million [22] - The company has proactively secured SBA authorizations for loans in its pipeline prior to the government shutdown [10] Q&A Session Summary Question: What is the credit outlook? - Management indicated that delinquencies are decreasing, with only four delinquent accounts in the franchise finance portfolio [30] Question: How are you managing the government shutdown's impact? - The company secured authorizations for loans before the shutdown and can continue to fund loans where authorization exists [41] Question: Can you provide insights on the franchise finance portfolio? - An external audit showed no downgrades and two upgrades in the franchise finance portfolio, boosting confidence [46]

Financial Data and Key Metrics Changes - Adjusted earnings per share increased by 5.7% quarter-over-quarter and 24.4% year-over-year [3] - Return on assets (ROA) improved to 1.11% from 0.87% in the same quarter last year [3] - Net interest income rose by $2.4 million, or 4.3%, from the prior quarter [6] - Net interest margin increased to 3.64% from 3.51% in the prior quarter and from 3.30% in the third quarter of 2024 [7][17] - Total regulatory capital ratios remain above well-capitalized thresholds, with the tangible common equity (TCE) ratio rising to 9.8% from 9.4% [8] Business Line Data and Key Metrics Changes - Total loan balances decreased by $5.7 million, despite an increase in loan originations [4] - Commercial lending group closed $317 million in new loan commitments, up from $248 million last quarter [13] - The commercial loan pipeline ended the quarter at $511 million, up from $473 million last quarter [14] - Total deposits increased by $73 million in Q3, with non-interest-bearing deposits rising by $33.7 million [4][5] Market Data and Key Metrics Changes - The cost of interest-bearing deposits decreased to 1.89% from 1.94% in the prior quarter [5] - Average interest rate for new commercial loans was 6.67%, up 12 basis points from the previous quarter [16] - Average balances on new accounts opened during the quarter were estimated at $40 million, compared to $72 million in the second quarter [16] Company Strategy and Development Direction - The pending merger with Olympic Bank Corp is expected to enhance profitability and growth in the Puget Sound market [3][17] - The company aims to return to traditional loan growth rates of mid to high single digits in 2026 [25] - Focus on maintaining strong credit quality while navigating economic volatility [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in credit quality despite economic volatility, with no material impact observed [12] - The company anticipates loan balances to remain flat in Q4 but expects growth to resume in 2026 as payoffs normalize [25][26] - Management is optimistic about the integration of Olympic Bank Corp and its potential to drive future growth [44][55] Other Important Information - Non-accrual loans totaled $17.6 million, representing 0.37% of total loans, an increase from 0.21% in the previous quarter [9] - Non-interest expense increased by $530,000, primarily due to compensation and benefits expenses [7] - The company has paused stock buybacks for the remainder of the year [8] Q&A Session Summary Question: What is the spot cost of deposits and NIM for September? - The spot rate on interest-bearing deposits was 1.87%, and the NIM for September was 3.66% [23] Question: How much opportunity is there to reduce rates on non-maturity deposits? - There is potential to reduce rates on approximately $1 billion in exception-priced deposits currently costing close to 3% [24] Question: What is the outlook for organic loan growth in 2026? - The company expects to return to mid to high single-digit growth rates in 2026, with positive net advances anticipated [25][26] Question: How has competition been trending in the markets? - Competition remains strong, with pricing competition on deposits varying by geography [42] Question: What are the capital priorities post-deal close? - The company plans to preserve capital during the transaction costs and anticipates earning back capital over time [62] Question: How is the loan-to-deposit ratio being managed? - The goal is to increase the loan-to-deposit ratio back to 85% and potentially higher [64]

Financial Data and Key Metrics Changes - Bankwell reported GAAP net income of $10.1 million, or $1.27 per share, up from $9.1 million, or $1.15 per share in the previous quarter [3] - Pre-provision net revenue return on assets was 1.7%, an increase of 27 basis points from the prior quarter [3] - Net interest income reached $26 million, while non-interest income increased to $2.5 million, driven by $1.4 million in SBA sales gains [7] - Net interest margin expanded to 3.34%, up 24 basis points over the prior quarter [7] - Efficiency ratio improved to 51.4%, down from 56.1% in the previous quarter [6][10] Business Line Data and Key Metrics Changes - The SBA division saw gains on sale rise to $1.4 million for the quarter, with total SBA originations of $22 million [5] - Year-to-date non-interest income, including SBA gains on sale, totaled $6 million [5] - Loan originations remained strong, with $220 million funded in the third quarter, bringing year-to-date fundings to just over $500 million [4] Market Data and Key Metrics Changes - Non-performing assets as a percentage of total assets fell to 56 basis points compared to 78 basis points last quarter [5][11] - Special mention loan balances decreased by $30 million [6] - Total assets reached $3.2 billion, slightly up from the previous quarter [11] Company Strategy and Development Direction - The company aims to diversify income streams and improve the deposit base while attracting talented banking professionals [16] - Bankwell is focusing on closing out pandemic-era credits with no further losses, with non-performing assets significantly reduced from 207 basis points a year ago [16] - The company is strategically increasing the proportion of variable rate loans from just over 20% to 35% [9] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook on credit for the upcoming quarters, with continued improvement in credit trends [4] - The government shutdown may temporarily impact SBA results, but the company remains a preferred lender and can continue to underwrite SBA credits [34] - The company anticipates flat loan growth for the year due to elevated payoffs, while affirming non-interest income guidance of $7 million-$8 million [15] Other Important Information - The allowance for credit losses remains at 110 basis points of total loans, with coverage of non-performing loans increasing to 177% [11] - The company expects $1.25 billion in time deposits to reprice favorably over the next 12 months by approximately 27 basis points, with an annualized incremental benefit of about $3.4 million [9] Q&A Session Summary Question: What is the current loan pricing and outlook for payoffs? - Management indicated that year-to-date originations have a weighted average rate of 7.86% and that strong loan demand continues, although timing and velocity of payoffs are affecting net loan growth [20][21] Question: How is the core deposit initiative developing? - Management reported that newly hired teams are starting to produce and add deposits, with full production expected by 2026 [26] Question: What is the impact of the government shutdown on SBA contributions? - Management noted that the duration of the shutdown will determine its impact, but they are currently able to underwrite SBA credits despite a temporary freeze on guarantees [34]

Financial Data and Key Metrics Changes - The company reported GAAP net income of $10.1 million, or $1.27 per share, up from $9.1 million, or $1.15 per share in the previous quarter [3] - Pre-provision net revenue return on assets was 1.7%, an increase of 27 basis points from the prior quarter [3] - Net interest margin (NIM) expanded to 3.34%, up 24 basis points over the prior quarter, driven by a 13 basis point rise in loan yields [8] Business Line Data and Key Metrics Changes - The SBA division saw gains on sale rise to $1.4 million for the quarter, with total SBA originations of $22 million [5] - Non-interest income increased to $2.5 million, driven by SBA sales gains, representing 8.8% of total revenue compared to 4.6% in the fourth quarter of 2024 [11] - Loan originations remained strong, with $220 million funded in the third quarter, bringing year-to-date fundings to just over $500 million [4] Market Data and Key Metrics Changes - Non-performing assets (NPA) as a percentage of total assets fell to 56 basis points from 78 basis points in the previous quarter [5] - Special mention loan balances decreased by $30 million, indicating improved credit quality [6] Company Strategy and Development Direction - The company aims to diversify income streams and improve its deposit base while attracting talented banking professionals [17] - The company is strategically increasing its proportion of variable rate loans from just over 20% to 35% to mitigate the impact of future interest rate changes [10] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook on credit trends and expects further improvement in non-performing assets [4][17] - The company anticipates that the recent rate cuts will have a short-term impact on net interest margin but expects improvement as term deposits mature [10] Other Important Information - The efficiency ratio improved to 51.4%, down from 56.1% in the previous quarter, reflecting better operational efficiency [6] - The company affirmed its non-interest income guidance of $7 to $8 million for the full year [16] Q&A Session Summary Question: Update on loan pricing and elevated payoffs - Management indicated that year-to-date originations have a weighted average rate of 7.86% and noted that elevated payoffs are expected to continue into 2026 [21][22] Question: Update on core deposit initiative - Management reported that new teams hired are starting to produce deposits, but full production is expected by 2026 [27] Question: Impact of government shutdown on SBA business - Management stated that the duration of the government shutdown will determine its impact on SBA income, but they are currently able to underwrite SBA credits [35]

Financial Data and Key Metrics Changes - Net interest income increased by $1.5 million compared to the second quarter and by $5 million year-over-year [4] - Net income rose by $3.5 million, or 43%, compared to Q3 of 2024 [5] - Return on average assets improved by 28 basis points to 1.16% compared to 0.88% in the third quarter of last year [5] - Earnings per share increased to $0.47 in the third quarter, a 46% increase compared to Q3 a year ago [5] - Return on tangible common equity was reported at 12.35% [5] Business Line Data and Key Metrics Changes - Loans increased by $47 million for the second quarter, or 5.6% annualized, and grew by $286 million, or over 9%, year-over-year [8] - C&I loans grew by $194 million, and owner-occupied commercial real estate loans increased by $40 million [8] - Specialized lending groups now constitute 16% of total loans, with no single niche exceeding 5% of total loans [5] - Non-performing assets declined to 36 basis points compared to 40 basis points at June 30 and 47 basis points one year ago [11] Market Data and Key Metrics Changes - Deposit balances increased by over $55 million during the quarter, or an annualized 7% [9] - Average cost of deposits declined by 3 basis points to 2.69% for the quarter [15] - Average non-interest-bearing deposits grew by $21 million during the quarter and by $52 million year-to-date [15] Company Strategy and Development Direction - The company is evolving into a middle-market commercial bank, focusing on relationship-driven strategies rather than growth for its own sake [19] - New branch openings and strategic closures are part of the company's efforts to optimize its branch network [17] - The company aims to maintain a balance between growing deposits and managing costs effectively [19] Management's Comments on Operating Environment and Future Outlook - The economic outlook remains uncertain, but the company is well-positioned for various rate environments [7] - Management is focused on maintaining credit quality despite some softness in the small business segment [6] - The company anticipates a modest increase in expenses due to new branches but aims to keep overall costs flat [35] Other Important Information - Non-interest income totaled $2.4 million in Q3 2025, down from $2.7 million in Q2 [12] - The efficiency ratio improved to 52%, remaining below 60% for the 25th consecutive quarter [13] - The company repurchased almost 120,000 shares at an average price of $14.91 during the quarter [7] Q&A Session Summary Question: Discussion on expenses and efficiency actions - Management highlighted ongoing focus on cost control while balancing investment opportunities, with no major new costs anticipated [32][33] Question: Insights on margin and deposit costs following Federal Reserve cuts - Management indicated that adjustments to deposit costs will be made in response to Federal Reserve actions, aiming for a neutral impact on margins [39][40] Question: Capital levels and buyback considerations - The company maintains a soft limit on total risk-based capital ratio around 11.5% and is open to various capital deployment strategies, including buybacks [44][45]

Financial Data and Key Metrics Changes - Reported net income available to common shareholders was $89.2 million, with earnings per common share at $0.63. Adjusted operating earnings available to common shareholders were $119.7 million or $0.84 per common share, resulting in an adjusted operating return on tangible common equity of 20.1% and an adjusted operating return on assets of 1.3% [15][16] - Total allowance for credit losses decreased to $320 million, down approximately $22.4 million from the second quarter, with net charge-offs increasing to $38.6 million or 56 basis points annualized [16][17] - Tax equivalent net interest income was $323.6 million, a decrease of $2.1 million from the second quarter, with a steady net interest margin at 3.83% [18][19] Business Line Data and Key Metrics Changes - Quarterly loan growth was approximately 0.5% annualized, with average loan growth quarter over quarter at 4.3% annualized. The company expects year-end loan balances to range between $27.7 billion and $28 billion [6][8] - Non-interest income decreased by $29.7 million to $51.8 million, primarily due to a pretax loss related to the final CRE loan sale settlement [20] - Adjusted operating non-interest income increased by $5.1 million to $56.6 million, driven by higher loan-related interest rate swap fees and increased equity method investment income [21] Market Data and Key Metrics Changes - The company maintains a well-diversified portfolio, with approximately 23% of total loans in the Washington metro area and 77% across a broader footprint. Non-performing assets as a percentage of loans held for investment remained low at 0.49% [10][11] - The unemployment rate in Maryland to Virginia stood at 3.6%, below the national average of 4.3%, indicating resilience in the market despite government employment reductions and shutdown concerns [12] Company Strategy and Development Direction - The integration of Sandy Spring Bank is progressing smoothly, with expectations to achieve cost-savings targets and enhanced earnings power visible on a reported basis by 2026 [4][5] - The company aims to deliver sustainable growth and top-tier financial performance, leveraging strategic advantages gained from the Sandy Spring acquisition and continued organic growth opportunities [5][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in asset quality, reaffirming the forecast for the full year 2025 net charge-off ratio to be between 15 and 20 basis points [10] - The company anticipates mid-single-digit loan growth for 2026, with potential for high single-digit growth in a more normalized environment [33][34] Other Important Information - The company paid a common stock dividend of $0.34 per share, an increase of 6.3% from the previous year's third quarter dividend amount [24] - Full-year projections include net interest income between $1.16 billion and $1.165 billion, with an expected net interest margin for the full year between 3.75% and 3.8% [25][26] Q&A Session Summary Question: Loan growth outlook for 2026 - Management expects mid-single-digit loan growth for 2026, with potential for high single-digit growth in a normalized environment, supported by strong pipelines and new client acquisition [33][34] Question: Expense outlook and efficiency ratio - The efficiency ratio is expected to be in the mid-40s for 2026, with a focus on maintaining a flat expense base while expanding in North Carolina [35][36] Question: Credit health and trends - Overall credit trends are positive, with low non-performing assets and past dues. The two charge-offs were isolated events, and management remains confident in the portfolio's health [60][61]

Financial Performance - OceanFirst reported core diluted EPS of $036 and core ROAA of 060% for Q3 2025[38] - Net interest income for Q3 2025 was $91 million[38] - The core ROTCE for Q3 2025 was 719%[38] Loan Portfolio - Total loans increased by $373 million, equivalent to a 14% annualized growth rate, with commercial and industrial (C&I) loans contributing $219 million to this increase[40, 45] - The commercial loan pipeline remains strong at $711 million, expected to drive further growth in Q4 2025[40, 45] - As of Q3 2025, non-performing loans accounted for 034% of total loans[8] Deposit Trends - Deposits, excluding brokered deposit run-off of $118 million, increased by $321 million from the previous quarter[40] - Premier Banking teams contributed $242 million in deposits as of September 30, 2025, with a weighted average cost of 264%[40, 41] - Total deposits reached $104 billion, with commercial deposits accounting for 56% and consumer deposits for 44%[8, 26] Strategic Initiatives - OceanFirst strategically decided to outsource its residential loan originations and title business platforms, anticipating annual expense savings of approximately $14 million[40] - One-time costs associated with outsourcing residential loan originations and title business platforms totaled $4 million in Q3 2025 and are expected to be approximately $8 million in Q4 2025[40]

Core Financial Performance - The company reported net income available to common stockholders of $25.8 million for Q3 2025, down from $27.9 million in Q2 2025 but up from $11.5 million in Q3 2024 [2] - Adjusted net income for Q3 2025 was $26.6 million, with adjusted EPS at $0.61, compared to $11.5 million and $0.29 in Q3 2024 [3] - Pre-tax pre-provision net revenue for Q3 2025 was $53.4 million, an increase of 8% from the previous quarter and 79% year-over-year [4] Net Interest Income and Margin - Net interest income for Q3 2025 was $103.4 million, compared to $98.1 million in Q2 2025 and $79.9 million in Q3 2024 [7] - The net interest margin (NIM) increased to 3.01% in Q3 2025 from 2.98% in Q2 2025 and 2.50% in Q3 2024 [7] - The company anticipates further NIM expansion in Q4 2025 due to improved loan and deposit spreads following a Federal Reserve rate cut [8] Loan and Deposit Growth - Total deposits reached $12.06 billion at the end of Q3 2025, up from $11.74 billion in Q2 2025 and $11.42 billion in Q3 2024 [16] - Core deposits increased by $971.9 million year-over-year, while business loans grew by $160.5 million quarter-over-quarter and $409.1 million year-over-year [10] - The loan-to-deposit ratio decreased to 88.9% at the end of Q3 2025 from 92.6% in the prior quarter [10] Non-Interest Income and Expenses - Non-interest income for Q3 2025 was $12.2 million, up from $11.6 million in Q2 2025 and $7.6 million in Q3 2024 [18] - Total non-interest expense was $62.2 million in Q3 2025, compared to $60.3 million in Q2 2025 and $57.7 million in Q3 2024 [19] - The efficiency ratio improved to 53.8% in Q3 2025 from 55.0% in the previous quarter and 65.9% in Q3 2024 [22] Credit Quality and Capital Management - Non-performing loans increased to $72.1 million at the end of Q3 2025, up from $53.2 million in Q2 2025 [24] - A credit loss provision of $13.3 million was recorded in Q3 2025, compared to $9.2 million in Q2 2025 [24] - Stockholders' equity rose to $1.45 billion at the end of Q3 2025, with a Common Equity Tier 1 Ratio of 11.53% [25][26]

Financial Data and Key Metrics Changes - The company reported net income of $35.3 million or $0.92 of earnings per diluted share for the third quarter, with adjusted net income increasing 30% annualized over the prior quarter to $36.6 million or $0.96 per diluted share [6][7] - The return on tangible common equity was 14.72%, achieved while maintaining a high level of capital [4] - The fully taxable equivalent net interest margin expanded three basis points during the third quarter to 3.98%, with an annualized growth of 11 basis points compared to the same quarter last year [9] Business Line Data and Key Metrics Changes - Loan fundings for the quarter totaled $421 million, bringing total year-to-date loan fundings to $1 billion, with quarterly loan fundings increasing each quarter of 2023 [7][8] - Non-interest income for the third quarter totaled $20.7 million, which is 21% higher than the second quarter and 13% higher than the third quarter of last year [10] - Non-interest expense totaled $67.2 million, including $1.7 million of acquisition expenses and $6.2 million of 2Unify expenses [11] Market Data and Key Metrics Changes - Total deposits ended the quarter $202 million higher than the prior quarter, with average deposits holding steady at $8.2 billion [10] - The cost of deposits totaled 2.08%, while the total cost of funds was 2.1% [10] Company Strategy and Development Direction - The company announced a merger with Vista Bankshares, which is expected to close in the first quarter, and management is optimistic about the strategic value of this transaction [5][13] - The company is focused on maintaining pricing discipline, which has resulted in solid margin expansion [8] - The launch of 2Unify is seen as a significant step forward, with plans to provide revenue guidance in the next quarterly earnings call [11][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the quality of new loan production and the strength of new relationships, despite headwinds from loan payoffs in the commercial real estate (CRE) portfolio [4][5] - Credit quality improved during the quarter, with a 20% reduction in non-performing loans [9] - Management is prepared to adjust deposit rates in response to potential Fed rate cuts, indicating a proactive approach to managing interest margins [22][23] Other Important Information - The company ended the quarter with a strong tangible common equity (TCE) ratio of 10.6% and a common equity Tier 1 ratio of 14.7% [12] - The tangible book value per share grew 12% annualized to $27.45 [12] Q&A Session Summary Question: Can you elaborate on the margin and expected impacts of rate cuts? - Management indicated that the third quarter's margin was positively impacted by recoveries and that they are prepared to adjust deposit rates in line with Fed actions [21][22] Question: What are the expectations for loan growth in Q4? - Management noted that the reduction in loan volume was not driven by directive paydowns and expressed optimism about the loan pipeline for Q4 [32][34] Question: How much are 2Unify expenses expected to be in Q4? - Expected 2Unify expenses for Q4 are in the range of $7 million to $9 million, accounting for increased marketing and variable costs [37] Question: What are the opportunities from the Vista acquisition? - Management highlighted the potential for growth in treasury management and wealth management services, leveraging the strengths of both organizations [55][56]