WSBF 10-K & 10-Q changes, risk factors and insider trading
Waterstone Financial, Inc. · Nasdaq · Savings Institution, Federally Chartered · CIK 1569994 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Fraud by merchants or others could have a material adverse effect on our business and financial condition.”
New heading “The potential for fraud in the card payment industry is significant and could adversely affect our business and results of operations.”
New heading “We face funds transfer and payments-related risks.”
New heading “Our reliance on and integration of artificial intelligence (AI) and machine learning (ML) technologies expose us to various risks, including operational, data, regulatory, and reputational risks, which could materially affect our business and financial results.”
New heading “The grant of bank charters and special purpose fintech charters by the Office of the Comptroller of the Currency to fintech companies could present financial risk and market risk to us generally and the payments processing business specifically.”
Largest changes
“Our reliance on and integration of artificial intelligence (AI) and machine learning (ML) technologies expose us to various risks, including operational, data, regulatory, and reputational risks, which could materially affect our business and financial results.”see in full comparison
“The current U.S. administration also has implemented rapid shifts in macroeconomic policies, such as those relating to trade restrictions and tariffs, which have created significant uncertainties regarding U.S. economic growth, the potential for recession, and concerns over an increase in inflation. Slow economic growth, economic contraction or recession, or shifts in broader consumer and business trends would significantly impact our ability to originate loans, the ability of borrowers to repay loans, and the value of the collateral securing loans.”see in full comparison
“Issuers of prepaid and debit cards and other companies have suffered significant losses in recent years with respect to the theft of cardholder data that has been illegally exploited for personal gain. The theft of such information is regularly reported and affects individuals and businesses. Losses from various types of fraud have been substantial for certain card industry participants. We also rely upon third parties for transaction processing services, which subjects us and our customers to risks related to the vulnerabilities of those third parties. …”see in full comparison
“The grant of bank charters and special purpose fintech charters by the Office of the Comptroller of the Currency to fintech companies could present financial risk and market risk to us generally and the payments processing business specifically.”see in full comparison
“These events have led to a greater focus by institutions, investors and regulators on the on-balance sheet liquidity of and funding sources for financial institutions, the composition of its deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management. If we are unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, it may have a material adverse effect on our financial condition and results of operations.”see in full comparison
“The potential for fraud in the card payment industry is significant and could adversely affect our business and results of operations.”see in full comparison
Full comparison: every changed paragraph (22)
In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve Board. An important function of the Federal Reserve Board is to regulate the money supply and credit conditions. The Federal Reserve Board's policies determine in large part the cost of funds for lending and investing and the return earned on those loans and investments, both of which affect our net interest margin. Its policies can also adversely affect borrowers, potentially increasing the risk that they may fail to repay their loans. Among the instruments used by the Federal Reserve Board to implement these objectives are open market purchases and sales of U.S. government securities, adjustments of the discount rate and changes in banks’ reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits. Changes in Federal Reserve Board and other governmental policies, fiscal policy, and our regulatory environment generally are beyond our control, and we are unable to predict what changes may occur or the manner in which any future changes may affect our business, financial condition and results of operations.
Changes in interest rates also affect the current fair value of our interest-earning investment securities portfolio. Generally, the value of securities moves inversely with changes in interest rates. At December 31, 2024,2025, the fair value of our investment portfolio totaled $208.5$230.8 million. Net unrealized losses on these securities totaled $24.1$15.7 million at December 31, 2024.2025. During the year ended December 31, 2024,2025, we incurred other comprehensive lossesincome of $994,000,$6.5 million, net of tax benefit,expenses, related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio.
Any increase in market interest rates may further reduce our mortgage banking income. We generate revenues primarily from gains on the sale of mortgage loans to investors, and from the amortization of deferred mortgage servicing rights. Although we had a mortgage banking income increase of $7.9 million during the year ended December 31, 2024, it remains a challenging environment. We also earn interest on loans held for sale while awaiting delivery to our investors. In this rising and higher interest rate environment, our mortgage loan originations have decreased, resulting in fewer loans that are available for sale. This resulted in a decrease in interest income and a decrease in revenues from loan sales. In addition, our results of operations are affected by the amount of noninterest expense associated with mortgage banking activities, such as salaries and employee benefits, occupancy, equipment, data processing and other operating costs. During periods of reduced loan demand, our results of operations may continue to be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in mortgage loan origination activity.
We experienced a continued shift in deposits from lower-cost (savings and NOW) accounts to higher-cost certificates of deposit. Although fed funds interest rate decreased in the past year, we continue to keep rates competitive in a challenging and competitive market.
In addition, as a result of rising interest rates, we have experienced a shift in deposits from lower-cost (savings, NOW, and money market) accounts to higher-cost certificates of deposit. However, the rates we earn on our loans did not increase as rapidly during the year ended December 31, 2024, as we have a significant amount of fixed-rate residential real estate loans where the interest rates did not increase commensurate with the increase in market interest rates.
Significant changes to the size, structure, powers and operations of the federal government, changes to U.S. economic policies, and uncertainties regarding the potential for these changes may cause economic disruptions that could, in turn, adversely impact our business, results of operations and financial condition.
The current U.S. administration also has implemented rapid shifts in macroeconomic policies, such as those relating to trade restrictions and tariffs, which have created significant uncertainties regarding U.S. economic growth, the potential for recession, and concerns over an increase in inflation. Slow economic growth, economic contraction or recession, or shifts in broader consumer and business trends would significantly impact our ability to originate loans, the ability of borrowers to repay loans, and the value of the collateral securing loans.
Other political and economic events within the United States, including a contentious domestic political environment, changes in or disagreements over U.S. monetary policy and actions of the FRS, disagreements over long-term federal budget and deficit reduction plans, disagreements over, or threats not to increase, the U.S. government’s borrowing limit (or “debt ceiling”), and risk of further downgrade of the ratings of U.S. government debt obligations, also may negatively impact financial markets and the U.S. economy.
Further, the perception of the potential for additional, significant changes in federal regulatory or economic policy also has increased uncertainty and may exacerbate declines in investor and consumer confidence, which in turn may adversely impact financial markets and the broader economy of the U.S.
Regional business and economic conditions are a major driver of our results of operations. Difficult conditions in the regional business and economic environment, including those caused by the lack of stability and predictability of U.S. policymaking, may materially adversely affect our operating expenses, the quality of our assets, credit losses, and the demand for our products and services.
On March 9, 2023, Silvergate Bank, La Jolla, California, announced its decision to voluntarily liquidate its assets and wind down operations. On March 10, 2023, Silicon Valley Bank, Santa Clara, California, was closed by the California Department of Financial Protection and Innovation. On March 12, 2023, Signature Bank, New York, New York, was closed by the New York State Department of Financial Services, and on May 1, 2023, First Republic Bank, San Francisco, California, was closed by the California Department of Financial Protection and Innovation. These banks also had elevated levels of uninsured deposits, which may be less likely to remain at the bank over time and less stable as a source of funding than insured deposits. These failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions.
These events have led to a greater focus by institutions, investors and regulators on the on-balance sheet liquidity of and funding sources for financial institutions, the composition of its deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management. If we are unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, it may have a material adverse effect on our financial condition and results of operations.
Fraud by merchants or others could have a material adverse effect on our business and financial condition.
We may be liable for fraudulent transactions initiated by merchants or others. Examples of fraud include when a merchant or other party knowingly uses a stolen or counterfeit card to make a transaction, or if a merchant intentionally fails to deliver the merchandise or services sold in an otherwise valid transaction. Criminals are using increasingly sophisticated methods to engage in illegal activities such as counterfeiting and fraud. It is possible that incidents of fraud could increase in the future. Failure to effectively manage risk and prevent fraud would increase our chargeback liability or other liability. Increases in chargebacks or other liability could have a material adverse effect on our business, financial condition, and results of operations.
The potential for fraud in the card payment industry is significant and could adversely affect our business and results of operations.
Issuers of prepaid and debit cards and other companies have suffered significant losses in recent years with respect to the theft of cardholder data that has been illegally exploited for personal gain. The theft of such information is regularly reported and affects individuals and businesses. Losses from various types of fraud have been substantial for certain card industry participants. We also rely upon third parties for transaction processing services, which subjects us and our customers to risks related to the vulnerabilities of those third parties. We, in many cases, have indemnification agreements with third parties; however, these agreements may not fully cover losses. Fraudulent activity could also result in the imposition of regulatory sanctions, including significant monetary fines, which could adversely affect our business, results of operations and financial condition. Although fraud has not had a material impact on our profitability, it is possible that such activity could adversely impact profitability in the future.
We face funds transfer and payments-related risks.
As a financial institution, we bear funds transfer risks of different types, which result from large transaction volumes and large dollar amounts of incoming and outgoing money transfers. Loss exposure may result if money is transferred before it is received, or legal rights to reclaim monies transferred are asserted, including payments made to merchants for payment clearing, while customers have statutory periods to reverse their payments. Exposure also results from payments made prior to receipt of offsetting funds, as accommodations to customers. We are subject to unique settlement risks as our transfers may be larger than typical financial institutions of our size. Transfers could also be made in error or as a result of fraud. Additionally, as with other financial institutions, we may incur legal liability or reputational risk, if we unknowingly process payments for companies in violation of money laundering laws or other regulations or immoral activities.
Our reliance on and integration of artificial intelligence (AI) and machine learning (ML) technologies expose us to various risks, including operational, data, regulatory, and reputational risks, which could materially affect our business and financial results.
If we cannot effectively manage these challenges, including adapting to rapid technological change and ensuring responsible AI governance, our reputation, competitive position, and financial performance could be significantly harmed.
The grant of bank charters and special purpose fintech charters by the Office of the Comptroller of the Currency to fintech companies could present financial risk and market risk to us generally and the payments processing business specifically.
In 2018, the Office of the Comptroller of the Currency announced that it would begin to accept and evaluate charters for entities that wanted to conduct certain components of a banking business pursuant to a federal charter, known as a special purpose national bank charter. Intended to promote economic opportunity and spur financial innovation, an institution with a special purpose national bank charter may engage in paying checks, lending money and taking deposits. The Office of the Comptroller of the Currency has granted national bank charters to companies that were previously non-bank fintech companies. If, in the future, the Office of the Comptroller of the Currency determines to grant any special purpose national bank charter applications or continues to grant bank charters to fintech applicants, recipients of such charters may enter the U.S. payments market and other business activities that we conduct, which could increase the competition we face and have a material adverse effect on us. This could result in lower fee income, and loss of deposits, related to our payments processing business.
Management's Discussion & Analysis (MD&A)
Largest changes
“Securities Available for Sale. Securities available for sale increased by $3.6 million to $208.5 million at December 31, 2024 from $204.9 million at December 31, 2023. The increase was primarily due to purchases of municipal bonds to take advantage of the increase in interest rates. The increase was partially offset by an increase in unrealized losses on securities, as rising long-term rates put downward pressure on securities prices. Purchases for the year exceeded the combination of security paydowns and maturities of debt securities.”see in full comparison
“Securities Available for Sale. Securities available for sale increased by $22.3 million to $230.8 million at December 31, 2025 from $208.5 million at December 31, 2024. The increase was primarily due to the purchases of securities exceeding paydowns and maturities and an increase in fair value as longer term interest rates decreased compared to the prior year period.”see in full comparison
During the years ended December 31,see in full comparison2024,2025, and2023,2024, we originated on a consolidated basis$2.13$2.05 billion and$2.02$2.13 billion in loans for sale and sold loans on a consolidated basis of$2.24$2.11 billion and$2.06$2.24 billion. During theyearsyear ended December20242025,andloan2023,originations net of loan repayments resulted in a positive cash flow of $5.2 million. During the year ended December 2024, loan originations net of loan repayments resulted in a negative cashflows offlow $16.7million and $154.2million. Cash received from the principal repayments of debt and mortgage related securities and maturity and calls of debt securities totaled$30.0$36.9 million and$24.9$31.0 million for the years ended December 31,20242025 and2023,2024, respectively. We purchased$34.3$50.0 million and$29.5$34.3 million in debt securities and mortgage related securities classified as available for sale during the years ended December 31,20242025 and2023,2024, respectively. The net changes in deposits were a net increase of$169.3$77.4 million and a netdecreaseincrease of$8.4$169.3 million for the year ending December 31,20242025 and2023,2024, respectively. There was a decrease in net borrowings of $34.3 million for the year ended December 31, 2025 and a net decrease in borrowings of $164.5 million for the year ended December 31,2024 and a net increase in borrowings of $224.3 million for the year ended December 31, 2023.2024. During the years ended December 31,20242025 and2023,2024, we repurchased common stock of$14.9$16.2 million and$26.0$14.9 million, respectively. During the years ended December 31,20242025 and2023,2024, we paid cash dividends on common stock of$11.3$10.8 million and$15.4$11.3 million, respectively.
Net income totaled $1.4 million for the year ended December 31,see in full comparison20242025 compared to netlossincome of$9.6$1.4 million for the year ended December 31,2023.2024. We originated$2.15$2.05 billion in mortgage loans held for sale (including sales to the community banking segment) during the year ended December 31,2024,2025, which representsanaincreasedecrease of$26.6$98.0 million, or1.3%,4.6%, from the$2.12$2.15 billion originated during the year ended December 31,2023.2024. Theincreasedecrease in loan production volume was driven by a$109.4decrease in purchase products of $135.0 million, or128.5%,7.0%. The decrease in purchase products was partially offset by a $37.0, or 16.4% increase in refinance products due to a decrease in mortgage rates at various points throughout the year. Mortgage purchase products decreased$82.8$135.0 million, or4.1%7.0% as housing inventory remained low andinterestaffordablerateshousingremainedinventoryrelativelyremainshigh.limited. Total mortgage banking noninterest incomeincreaseddecreased$5.8$4.7 million, or7.4%,5.6%, to $79.5 million during the year ended December 31, 2025 compared to $84.3 million during the year ended December 31,2024 compared to $78.5 million during the year ended December 31, 2023.2024. Theincreasedecrease in mortgage banking noninterest income was related to a1.3%4.6%increasedecrease in volume and a6.6%1.0%increasedecrease in gross margin on loans originated and sold for the year ended December 31,20242025 compared to December 31,2023.2024. Gross margin on loans originated and sold is the ratio of mortgage banking income (excluding the change in interest rate lock fair value) divided by total loan originations. The gross margin on loans originated and sold contraction reflects decreased industry demand due to the increased competition from mortgage originators. We sell loans on both a servicing-released and a servicing-retained basis. Waterstone Mortgage Corporation has contracted with a third party to service the loans for which we retain servicing.
Borrowings. Total borrowings decreasedsee in full comparison$164.5$34.3 million to $412.3 million at December 31, 2025, from $446.5 million at December 31,2024, from $611.1 million at December 31, 2023.2024. The community banking segment decreased its short-term FHLB borrowings by$15.4$77.5 million and increased its long-term FHLB borrowings by$5.0$40.0 million.In addition, the $145.0 million short-term borrowing from the Federal Reserve Bank was paid down in the fourth quarter of 2024.External short-term borrowings at the mortgage banking segment increased a total of$900,000$3.2 million to $6.2 million at December 31, 2025 from $3.0 million at December 31,2024 from $2.1 million at December 31, 2023.2024. The overall decrease in borrowings was primarily offset by the increase in deposits.
Shareholders’ equitysee in full comparisondecreasedincreased by$4.9$10.3 million, or1.4%,3.0%, to $349.4 million at December 31, 2025 from $339.1 million at December 31,2024 from $344.1 million at December 31, 2023.2024. Shareholders' equitydecreasedincreased primarily due tothe the ongoing repurchase of stock, dividends declared, and decreaseincreases in the fair value of the securitiesportfolio.portfolioPartiallyandoffsettingantheincreasedecreases, there were increases due to thein netincome, additional paid-in capital as stock options were exercised and equity awards vested, and unearned ESOP shares vesting.income.
Full comparison: every changed paragraph (32)
Total Assets. Total assets decreasedincreased by $3.8$49.9 million, or 0.2%,2.3%, to $2.21$2.26 billion at December 31, 20242025 from $2.21 billion at December 31, 2023.2024. The decreaseincrease in total assets primarily reflects the decreaseincrease in cash and cash equivalents, loans held for sale, and securities available for sale, partially offset by increasesdecreases in loans held for investment, cash surrender value of life insurance,investment and cashprepaid expenses and cashother equivalents.assets.
Cash and Cash Equivalents. Cash and cash equivalents increased $3.3$31.3 million to $71.1 million at December 31, 2025 from $39.8 million at December 31, 2024 from $36.4 million at December 31, 2023.2024. The increase in cash and cash equivalents primarily reflects the decrease in funding of loans held for saleinvestment and increase in deposit liabilities.
Securities Available for Sale. Securities available for sale increased by $22.3 million to $230.8 million at December 31, 2025 from $208.5 million at December 31, 2024. The increase was primarily due to the purchases of securities exceeding paydowns and maturities and an increase in fair value as longer term interest rates decreased compared to the prior year period.
Securities Available for Sale. Securities available for sale increased by $3.6 million to $208.5 million at December 31, 2024 from $204.9 million at December 31, 2023. The increase was primarily due to purchases of municipal bonds to take advantage of the increase in interest rates. The increase was partially offset by an increase in unrealized losses on securities, as rising long-term rates put downward pressure on securities prices. Purchases for the year exceeded the combination of security paydowns and maturities of debt securities.
Loans Held for Sale. Loans held for sale decreasedincreased $29.1$9.1 million, or 17.6%,6.7%, to $145.1 million at December 31, 2025 from $135.9 million at December 31, 2024 from $165.0 million at December 31, 2023 due to ana increasedecrease in mortgage rates at the end of the year.
Loans Receivable. Loans receivable held for investment increaseddecreased $16.4$5.0 million, or 1.0%,0.3%, to $1.68 billion at December 31, 20242025 from $1.66$1.68 billion at December 31, 2023.2024. The increasedecrease in total loans receivable was primarily attributable to increases in each of the multi-family, construction, and commercial real estate loan categories offset by a decrease in the one-to-four family loan category.category and was partially offset by increases in the multi-family and commercial real estate categories.
Allowance for Credit Losses. The allowance for credit losses decreased $302,000$769,000 to $17.5 million at December 31, 2025 from $18.2 million at December 31, 2024 from $18.5 million at December 31, 2023.2024. The decrease primarily resulted from a decrease in historical loss rates and changeddecreases in certain qualitative factors. Net recoveries totaled $40,000$122,000 for the year ended December 31, 2024.2025. During the year ended December 31, 2024,2025, we made adjustments to our qualitative factors, primarily to account for the changes in internal metrics and external risk factors. See Note 3 - Loans Receivable of the notes to consolidated financial statements for further discussion on the allowance for credit losses. The forecast factor remained unchanged as we monitor the economic environment going forward.
Prepaid Expenses and Other Assets. Total prepaid expenses and other assets decreased $4.2$10.3 million to $38.0 million at December 31, 2025 from $48.3 million at December 31, 2024 from $52.4 million at December 31, 2023.2024. The decrease was primarily due to a decrease in the mortgage servicing rights asset as well as decreases in receivablesback-to-back inloan theswap mortgagefair bankingvalue segmentadjustment and a decrease inthe deferred tax assetsasset duefor tounrealized alosses decreaseas inlong theterm Wisconsininterest staterates effective tax rate.decreased.
Deposits. Deposits increased by $169.3$77.4 million to $1.44 billion at December 31, 2025, from $1.36 billion at December 31, 2024, from $1.19 billion at December 31, 2023.2024. The increase was driven by $94.3a $45.8 million increase in money market & savings deposits, an increase of $16.0 million in new brokered certificates of deposit, an increase of $81.0$11.1 million in non-brokered certificates of deposit, and an increase of $10.0 million in money market and savings deposits. The increase as partially offset by a decrease of $16.0$4.5 million in demand deposits. The increase in deposits was used to fund the increase in loans held for investmentsale, buy available-for-sale securities and replacing matured borrowings.
Borrowings. Total borrowings decreased $164.5$34.3 million to $412.3 million at December 31, 2025, from $446.5 million at December 31, 2024, from $611.1 million at December 31, 2023.2024. The community banking segment decreased its short-term FHLB borrowings by $15.4$77.5 million and increased its long-term FHLB borrowings by $5.0$40.0 million. In addition, the $145.0 million short-term borrowing from the Federal Reserve Bank was paid down in the fourth quarter of 2024. External short-term borrowings at the mortgage banking segment increased a total of $900,000$3.2 million to $6.2 million at December 31, 2025 from $3.0 million at December 31, 2024 from $2.1 million at December 31, 2023.2024. The overall decrease in borrowings was primarily offset by the increase in deposits.
Other Liabilities. Other liabilities decreased $2.6$838,000 to $57.6 million at December 31, 2025 compared to $58.4 million at December 31, 2024 compared to $61.0 million at December 31, 2023.2024. Other liabilities decreased primarily due to decreasesthe decrease in back-to-back loan saleswap liabilityfair andvalue amounts payable to investors in the mortgage banking segment.adjustment.
Shareholders’ Equity. Shareholders’ equity decreasedincreased by $4.9$10.3 million, or 1.4%,3.0%, to $349.4 million at December 31, 2025 from $339.1 million at December 31, 2024 from $344.1 million at December 31, 2023.2024. Shareholders' equity decreasedincreased primarily due to theincreases thein ongoingnet repurchase of stock, dividends paid,income and decrease in the fair value of the securities portfolio. Partially offsetting the decreases, there were increases due to the net income, additional paid-in capital as stock options were exercised and equity awards vested, and unearned ESOP shares vesting.
Net income from our community banking segment for the year ended December 31, 20242025 totaled $17.0$24.8 million compared to $18.6$17.0 million for the year ended December 31, 2023.2024. Net interest income decreasedincreased $3.8$8.2 million to $56.2 million for the year ended December 31, 2025 compared to $48.0 million for the year ended December 31, 2024 compared to $51.7 million for the year ended December 31, 2023.2024. Interest income on loans increased as replacement rates and average loans held for investment balances were higher than in the prior year and interest income on mortgage-related securities and debt securities, federal funds sold and short-term investments increased due to the increase in the average balance and replacement rates. Offsetting the increases in interest income, interest expense on deposits and borrowings increased as replacement rates and average balances increased.increased offset by a decrease in average cost of funds as there were fed funds rate cuts over the past year.
There was a negative provision for credit losses of $1.3 million for the year ended December 31, 2025 compared to a negative provision for credit losses of $145,000 for the year ended December 31, 2024 compared to a provision for credit losses of $441,000 for the year ended December 31, 2023.2024. The negative provision for credit losses consisted of a $319,000$891,000 negative provision related to adjustments to our qualitative factors, primarily to account for the changes in internal metrics and external risk factors and a $174,000$503,000 ofnegative provision related to unfunded commitments as the loan pipeline balance decreased for the year ended December 31, 2024.2025. The negative provision for credit losses related to loans was primarily due to a decrease in historical loss rates and certain qualitative factors. During the year ended December 31, 2024,2025, we made adjustments to our qualitative factors, primarily to account for the changes in internal metrics and external risk factors. The forecast factor remained unchanged as we monitor the economic environment going forward.
Noninterest income increased $916,000$395,000 for the year ended December 31, 20242025 due primarily to a $231,000 death benefit received in 2024, earnings on the bank owned life insurance,insurance and loan swap fees.
Compensation, payroll taxes, and other employee benefits expense increased $819,000$236,000 to $20.7$20.9 million during the year ended December 31, 20242025 primarily due to increased healthwages insuranceand costs.variable compensation. Other noninterest expense decreased $1.3$219,000 million to $2.5$2.3 million as certain loan-related expenses paid to the mortgage banking segment for the purchase of single-family adjustable rate mortgage loans decreased compared to the prior year. These fees are eliminated in the consolidated statements of income.
Net income totaled $1.4 million for the year ended December 31, 20242025 compared to net lossincome of $9.6$1.4 million for the year ended December 31, 2023.2024. We originated $2.15$2.05 billion in mortgage loans held for sale (including sales to the community banking segment) during the year ended December 31, 2024,2025, which represents ana increasedecrease of $26.6$98.0 million, or 1.3%,4.6%, from the $2.12$2.15 billion originated during the year ended December 31, 2023.2024. The increasedecrease in loan production volume was driven by a $109.4decrease in purchase products of $135.0 million, or 128.5%,7.0%. The decrease in purchase products was partially offset by a $37.0, or 16.4% increase in refinance products due to a decrease in mortgage rates at various points throughout the year. Mortgage purchase products decreased $82.8$135.0 million, or 4.1%7.0% as housing inventory remained low and interestaffordable rateshousing remainedinventory relativelyremains high.limited. Total mortgage banking noninterest income increaseddecreased $5.8$4.7 million, or 7.4%,5.6%, to $79.5 million during the year ended December 31, 2025 compared to $84.3 million during the year ended December 31, 2024 compared to $78.5 million during the year ended December 31, 2023.2024. The increasedecrease in mortgage banking noninterest income was related to a 1.3%4.6% increasedecrease in volume and a 6.6%1.0% increasedecrease in gross margin on loans originated and sold for the year ended December 31, 20242025 compared to December 31, 2023.2024. Gross margin on loans originated and sold is the ratio of mortgage banking income (excluding the change in interest rate lock fair value) divided by total loan originations. The gross margin on loans originated and sold contraction reflects decreased industry demand due to the increased competition from mortgage originators. We sell loans on both a servicing-released and a servicing-retained basis. Waterstone Mortgage Corporation has contracted with a third party to service the loans for which we retain servicing.
Our gross margin can be affected by the mix of both loan type (conventional loans versus governmental) and loan purpose (purchase versus refinance). Conventional loans include loans that conform to Fannie Mae and Freddie Mac standards, whereas governmental loans are those loans guaranteed by the federal government, such as a Federal Housing Authority or U.S. Department of Agriculture loan. Our origination efforts continue to be focused on loans made for the purpose of residential purchases, as opposed to mortgage refinance. The percentage of origination volume related to purchase activity decreased tofrom 88.9% fromto 96.0%87.1% of total originations for the year ended December 31, 20242025 and 2023,2024, respectively, as a year-over-year decrease in rates drove an increase in refinance activity, while low housing inventory and still relatively high interest rates suppressed purchase activity. The mix of loan type trended towards more conventionalgovernment loans and less governmentconventional loans, with a mix of 63.8%38.7% and 36.2%,61.3%, respectively of all loan originations, respectively, during the year ended December 31, 2024,2025, compared to 59.0%36.2% and 41.0%63.8% of all originations, respectively, during the year ended December 31, 2023.2024.
During the year ended December 31, 2025, the Company had no sales of mortgage servicing rights. During the year ended December 31, 2024, the Company sold mortgage servicing rights related to $233.1$233.0 million in loans serviced for third parties. The sale generated $2.1 million in net proceeds and a $152,000 gain. During the year ended December 31, 2023, the Company sold mortgage servicing rights related to $318.4 million in loans services for third parties, which generated $3.5 million in net proceeds and a $583,000 gain.
Total compensation, payroll taxes and other employee benefits decreased $3.7$1.8 million, or 5.7%,2.9%, to $59.6 million for the year ended December 31, 2025 compared to $61.4 million for the year ended December 31, 2024 compared to $65.1 million for the year ended December 31, 2023.2024. The decrease primarily related to decreased salary expense and incentivescommissions expense driven by reduced employee headcount and a decrease in new branches added over the past year.
(3) Interest income from tax exempt securities is computed on a taxable equivalent basis using a tax rate of 21% for the years ended December 31, 2025, 2024, 2023, and 2022.2023. The yields on debt securities, federal funds sold and short-term investments beforeafter tax-equivalent adjustments were 4.89%,4.94%, 4.18%,5.11%, and 1.51%4.35% for the years ended December 31, 2025, 2024, and 2023, and 2022, respectively.
Net interest income decreasedincreased $4.0$10.6 million, or 8.1%,22.9%, to $56.7 million during the year ended December 31, 2025 compared to $46.2 million during the year ended December 31, 2024 compared to $50.2 million during the year ended December 31, 2023.2024.
There was a negative provision for credit losses of $168,000$1.4 million during the year ended December 31, 20242025 compared to a $656,000$168,000 negative provision for loan losses for the year ended December 31, 2023.2024. The $168,000$1.4 negative provision for credit losses consisted of a $342,000$893,000 negative provision related to loans and $174,000$503,000 of negative provision related to unfunded commitments for the year ended December 31, 2024.2025. The decrease in the loan portfolio provision is due to the decrease in historical loss factors and certain qualitative factors. During the year ended December 31, 2024,2025, we made adjustments to our qualitative factors, primarily to account for the changes in internal metrics and external risk factors. The forecast factor remained unchanged as we monitor the economic environment going forward. The negative provision for credit losses related to unfunded loan commitments for the year ended December 31, 2025 was due primarily to a decrease in construction loans waiting to be funded.
The provision is primarily a function of the Company's reserving methodology and assessments of certain quantitative and qualitative factors which are used to determine an appropriate allowance for credit losses for the period. See further discussion regarding the allowance for loancredit losses in the "Asset Quality" section for an analysis of charge-offs, nonperforming assets, specific reserves and additional provisions and the "Allowance for Credit Loss" section.
Total noninterest income increaseddecreased $8.1$4.1 million, or 10.0%,4.6%, to $85.2 million during the year ended December 31, 2025 compared to $89.3 million during the year ended December 31, 2024 compared to $81.2 million during the year ended December 31, 2023.2024.
Income tax expense increased $3.7$1.7 million to $7.0 million during the year ended December 31, 2025, compared to $5.3 million during the year ended December 31, 2024, compared to $1.7 million during the year ended December 31, 20232024 as pretax income decreasedincreased $13.4by $9.4 million. Income tax expense was recognized during the year ended December 31, 20242025 at an effective rate of 22.1%21.1% compared to an effective rate of 15.0%22.1% during the year ended December 31, 2023.2024.
During the years ended December 31, 2024,2025, and 2023,2024, we originated on a consolidated basis $2.13$2.05 billion and $2.02$2.13 billion in loans for sale and sold loans on a consolidated basis of $2.24$2.11 billion and $2.06$2.24 billion. During the yearsyear ended December 20242025, andloan 2023,originations net of loan repayments resulted in a positive cash flow of $5.2 million. During the year ended December 2024, loan originations net of loan repayments resulted in a negative cash flows offlow $16.7 million and $154.2 million. Cash received from the principal repayments of debt and mortgage related securities and maturity and calls of debt securities totaled $30.0$36.9 million and $24.9$31.0 million for the years ended December 31, 20242025 and 2023,2024, respectively. We purchased $34.3$50.0 million and $29.5$34.3 million in debt securities and mortgage related securities classified as available for sale during the years ended December 31, 20242025 and 2023,2024, respectively. The net changes in deposits were a net increase of $169.3$77.4 million and a net decreaseincrease of $8.4$169.3 million for the year ending December 31, 20242025 and 2023,2024, respectively. There was a decrease in net borrowings of $34.3 million for the year ended December 31, 2025 and a net decrease in borrowings of $164.5 million for the year ended December 31, 2024 and a net increase in borrowings of $224.3 million for the year ended December 31, 2023.2024. During the years ended December 31, 20242025 and 2023,2024, we repurchased common stock of $14.9$16.2 million and $26.0$14.9 million, respectively. During the years ended December 31, 20242025 and 2023,2024, we paid cash dividends on common stock of $11.3$10.8 million and $15.4$11.3 million, respectively.
Deposits increased by $169.3$77.4 million from December 31, 20232024 to December 31, 2024.2025. The increase was driven by a $175.2 million increase in time deposits and a $10.0$45.8 million increase in money market & savings account,accounts, offseta by an $16.0$27.1 million decreaseincrease in time deposits, and a $4.5 million increase in demand deposits. Of the increase in time deposits, $94.3$16.0 million was due to the additionincrease of brokered certificates of deposit. Deposit flows are generally affected by the level of interest rates, market conditions, products offered by local competitors, and other factors.
Liquidity management is both a daily and longer-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLB which provide an additional source of funds. At December 31, 2024,2025, we had $150.0$190.0 million in long term advances from the FHLB with contractual maturity dates in 20272027, 2028, 2029, and 2029.2030. See Note 67 - Borrowings of the notes to audited consolidated financial statements for additional information about the remaining call option details of our FHLB long-term debt.
Shareholders’ equity decreasedincreased by $4.9$10.3 million, or 1.4%,3.0%, to $349.4 million at December 31, 2025 from $339.1 million at December 31, 2024 from $344.1 million at December 31, 2023.2024. Shareholders' equity decreasedincreased primarily due to the the ongoing repurchase of stock, dividends declared, and decreaseincreases in the fair value of the securities portfolio.portfolio Partiallyand offsettingan theincrease decreases, there were increases due to thein net income, additional paid-in capital as stock options were exercised and equity awards vested, and unearned ESOP shares vesting.income.
The Company's Board of Directors authorized a 2,000,000 share stock repurchase program in the second quarter of 2024. As of December 31, 2024,2025, the Company had approximately 1.7 million468,000 shares remaining in the plan.
During the year ended December 31, 2024,2025, our short-term debt decreased $159.5$74.3 million, of which $145.0 million was debt paid off from the Federal Reserve Bank through the borrowing facility called the Bank Term Funding Program.million. In addition, we repaid $175.0$90.0 million in FHLB long-term debt and took on $170.0$130.0 million of new FHLB long-term debt.
What changed in the latest 10-Q
Risk Factors
The following risk factors applicable to the Company supplement those disclosed in “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 and should be read in conjunction therewith.
Risk Related to Mortgage Banking Operations
The profitability of our mortgage banking operations depend significantly on the margins we earn from our mortgage banking activities, which include originating and selling residential mortgage loans. Mortgage banking margins are volatile and influenced by several factors beyond our control including market interest rates and related demand for residential loans from both consumers, as well as investors to whom we sell the loans that we have originated. During the quarter ended June 30, 2026 the results of operations for our mortgage baking operations were negatively impacted by lower sales margins received from investors in the secondary market. Continued lower sales margins received upon the sale of mortgage loans could have a negative impact on the result of operations of the mortgage banking segment, and the profitability of consolidated results of operations for the Company.
New heading “Risk Related to Mortgage Banking Operations”
Largest changes
“The profitability of our mortgage banking operations depend significantly on the margins we earn from our mortgage banking activities, which include originating and selling residential mortgage loans. Mortgage banking margins are volatile and influenced by several factors beyond our control including market interest rates and related demand for residential loans from both consumers, as well as investors to whom we sell the loans that we have originated. …”see in full comparison
see in full comparisonThereThehave been no material changes infollowing risk factors applicable to the Companyfromsupplement those disclosed in “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31,2025.2025 and should be read in conjunction therewith.
Full comparison: every changed paragraph (3)
ThereThe have been no material changes infollowing risk factors applicable to the Company fromsupplement those disclosed in “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.2025 and should be read in conjunction therewith.
Risk Related to Mortgage Banking Operations
The profitability of our mortgage banking operations depend significantly on the margins we earn from our mortgage banking activities, which include originating and selling residential mortgage loans. Mortgage banking margins are volatile and influenced by several factors beyond our control including market interest rates and related demand for residential loans from both consumers, as well as investors to whom we sell the loans that we have originated. During the quarter ended June 30, 2026 the results of operations for our mortgage baking operations were negatively impacted by lower sales margins received from investors in the secondary market. Continued lower sales margins received upon the sale of mortgage loans could have a negative impact on the result of operations of the mortgage banking segment, and the profitability of consolidated results of operations for the Company.
Management's Discussion & Analysis (MD&A)
New heading “Comparison of Community Banking Segment Results of Operations for the Six Months Ended June 30, 2026 and 2025”
New heading “Comparison of Mortgage Banking Segment Results of Operations for the Six Months Ended June 30, 2026 and 2025”
New heading “Consolidated Waterstone Financial, Inc. Results of Operations”
New heading “Net Interest Income”
New heading “Average Balance Sheets, Interest and Yields/Costs”
New heading “Rate/Volume Analysis”
New heading “Provision for Credit Losses”
New heading “Noninterest Income”
New heading “Comparison of Financial Condition at June 30, 2026 and December 31, 2025”
Removed heading “Comparison of Financial Condition at March 31, 2026 and December 31, 2025”
Largest changes
“Comparison of Community Banking Segment Results of Operations for the Six Months Ended June 30, 2026 and 2025”see in full comparison
“Comparison of Mortgage Banking Segment Results of Operations for the Six Months Ended June 30, 2026 and 2025”see in full comparison
“Comparison of Financial Condition at March 31, 2026 and December 31, 2025”see in full comparison
“Comparison of Financial Condition at June 30, 2026 and December 31, 2025”see in full comparison
Full comparison: every changed paragraph (75)
The following discussion and analysis is presented to assist the reader in understanding and evaluating the Company’s financial condition and results of operations. It is intended to complement the unaudited consolidated financial statements, footnotes, and supplemental financial data appearing elsewhere in this Quarterly Report on Form 10-Q and should be read in conjunction therewith. The detailed discussion in the sections below focuses on the results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025 and the financial condition as of MarchJune 31,30, 2026 compared to the financial condition as of December 31, 2025.
Our community banking segment generates the significant majority of our consolidated net interest income and requires the significant majority of our provision for loan losses. Our mortgage banking segment generates the significant majority of our noninterest income and a majority of our noninterest expenses. We have provided below a discussion of the material results of operations for each segment on a separate basis for the three and six months ended MarchJune 31,30, 2026 and 2025, which focuses on noninterest income and noninterest expenses. We have also provided a discussion of the consolidated operations of the Company, which includes the consolidated operations of the Bank and Waterstone Mortgage Corporation, for the same periods.
There were no significant items that impacted earnings for the three and six months ended MarchJune 31,30, 2026 and 2025.
Comparison of Community Banking Segment Results of Operations for the Three Months Ended MarchJune 31,30, 2026 and 2025
Net income totaled $6.0$7.3 million for the three months ended MarchJune 31,30, 2026 compared to $4.6$6.2 million for the three months ended MarchJune 31,30, 2025. Net interest income increased $2.8$2.2 million to $15.2$15.8 million for the three months ended MarchJune 31,30, 2026 compared to $12.4$13.6 million for the three months ended MarchJune 31,30, 2025. Interest expense on borrowings decreased $742,000$566,000 as growth in time deposits allowed us to carry a lower average balance of FHLB advances and interest expense on deposits decreased $932,000 as accounts repriced at a lower rate and transitioned to more money market accounts.
There was a provision for credit losses of $284,000$248,000 for the three months ended MarchJune 31,30, 2026 compared to a negative provision for credit losses of $518,000$19,000 for the three months ended MarchJune 31,30, 2025. The provision for credit losses of $284,000$248,000 consisted of a $240,000$171,000 provision related to loans and $44,000$77,000 provision related to unfunded commitments for the three months ended MarchJune 31,30, 2026. The current quarter increase was primarily due to increases in multi-familycommercial andreal construction loan balances along with an increase in multifamilyestate external qualitative factors. The provision for credit losses related to unfunded loan commitments for the quarter ended MarchJune 31,30, 2026 was due primarily to an increase of business and commercial real estate loans in the loan pipeline balance at quarter end.
Compensation, payroll taxes, and other employee benefits expense increased $363,000$585,000 to $5.6 million compared to the quarter ending MarchJune 31,30, 2025 primarily due to increases inincreased health insurance, variable compensation, restricted stockinsurance expense due to new directors and executive grants, and ESOP compensationexpense as the average market price per share priceincreased hascompared risento year-over-year.the prior year.
Comparison of Mortgage Banking Segment Results of Operations for the Three Months Ended MarchJune 31,30, 2026 and 2025
Net income totaled $12,000 for the three months ended March 31, 2026 compared to a net loss of $1.6$1.2 million for the three months ended MarchJune 31,30, 2026 compared to a net income of $1.5 million for the three months ended June 30, 2025. We originated $508.3$621.8 million in mortgage loans held for sale (including sales to the community banking segment) during the three months ended MarchJune 31,30, 2026, which represents an increase of $120.6$33.0 million, or 31.1%,5.6%, from the $387.7$588.8 million originated during the three months ended MarchJune 31,30, 2025. The increase in loan productionOrigination volume wasrelative driven by a $36.4 million, or 10.7%, increase into purchase productsactivity andaccounted afor $84.288.6% million,of ororiginations 173.7%,for increasethe inquarter refinanceended products.June 30, 2026 compared to 91.7% of total originations for the quarter ended June 30, 2025. Total mortgage banking noninterest income increaseddecreased $3.4 million,$280,000, or 21.5%,1.2%, to $19.1$22.4 million during the three months ended MarchJune 31,30, 2026 compared to $15.7$22.6 million during the three months ended MarchJune 31,30, 2025. The increasedecrease in mortgage banking noninterest income was related to a 31.1% increase in volume and was partially offset by a 8.3% decrease in gross margin on loans originated and sold for the three months ended MarchJune 31,30, 2026 compared to MarchJune 31,30, 2025. Gross margin on loans originated and sold is the ratio of mortgage banking income (excluding the change in interest rate lock fair value) divided by total loan originations. We sell loans on both a servicing-released and a servicing-retained basis. Waterstone Mortgage Corporation has contracted with a third party to service the loans for which we retain servicing.
Additionally, our overall margin can be affected by the mix of both loan type (conventional loans versus governmental) and loan purpose (purchase versus refinance). Conventional loans include loans that conform to Fannie Mae and Freddie Mac standards, whereas governmental loans are those loans guaranteed by the federal government, such as a Federal Housing Authority or U.S. Department of Agriculture loan. Loans originated for the purchase of a residential property comprised 73.9% of total originations during the three months ended March 31, 2026, compared to 87.5% of total originations during the three months ended March 31, 2025, respectively. The mix of loan type trended towards more conventional loans and less governmental loans, with conventional loans and governmental loans comprising 65.1% and 34.9% of all loan originations, respectively, during the three months ended March 31, 2026, compared to 62.0% and 38.0% of all loan originations, respectively, during the three months ended March 31, 2025.
Total compensation, payroll taxes and other employee benefits increased $2.4 million,$253,000, or 20.1%,1.6%, to $14.5$16.6 million for the three months ended MarchJune 31,30, 2026 compared to $12.1$16.3 million for the three months ended MarchJune 31,30, 2025. The increase primarily related to increased commission expense due to an increase in fundings,expense, manager pay expense as profitability improved,expense, production incentive expense, and salary expense offset by a decrease in health insurance expense.
Net interest income increased $2.9$2.3 million, or 23.0%,16.8%, to $15.5$16.0 million during the three months ended MarchJune 31,30, 2026 compared to $12.6$13.7 million during the three months ended MarchJune 31,30, 2025 primarily due to increased yields on our loan and securities portfolios as well as decreased cost of deposits and borrowings as replacement rates decreased compared to the prior year period.
There was a provision for credit losses of $264,000$236,000 for the three months ended MarchJune 31,30, 2026 compared to a negative $558,000$9,000 provision for credit losses for the three months ended MarchJune 31,30, 2025. The $264,000$236,000 provision for credit losses consisted of a $220,000$159,000 provision related to loans and a provision related to unfunded commitments of $44,000$77,000 for the three months ended MarchJune 31,30, 2026. During the three months ended MarchJune 31,30, 2026, the increase was primarily due to increases in multi-familycommercial andreal construction loan balances along with an increase in multifamilyestate external qualitative factors. The provision for credit losses related to unfunded loan commitments for the quarter ended MarchJune 31,30, 2026 was due primarily to an increase of business and commercial real estate loans in the loan pipeline balance at quarter end.
Total noninterest income increaseddecreased $3.1 million$89,000 or 18.3%,0.4%, to $20.2$24.2 million during the three months ended MarchJune 31,30, 2026 compared to $17.1$24.3 million during the three months ended MarchJune 31,30, 2025.
Total noninterest expenses increased $1.5$1.0 million, or 5.8%,3.5%, to $27.9$29.4 million during the three months ended MarchJune 31,30, 2026 compared to $26.4$28.4 million during the three months ended MarchJune 31,30, 2025.
Income tax expense totaled $1.6$2.2 million for the three months ended MarchJune 31,30, 2026 compared to $845,000$1.9 million during the three months ended MarchJune 31,30, 2025. The increase was primarily due to the increase in pre-tax income. Income tax expense was recognized on the statement of income during the three months ended MarchJune 31,30, 2026 at an effective rate of 20.6%20.4% of pretax income compared to the three months ended MarchJune 31,30, 2025 at an effective rate of 21.8%20.1% of pretax income.
Comparison of Community Banking Segment Results of Operations for the Six Months Ended June 30, 2026 and 2025
Net income totaled $13.2 million for the six months ended June 30, 2026 compared to $10.9 million for the six months ended June 30, 2025. Net interest income increased $5.0 million to $31.1 million for the six months ended June 30, 2026 compared to $26.0 million for the six months ended June 30, 2025. Interest expense on borrowings decreased $1.3 million as growth in average deposits allowed us to carry a lower average balance of FHLB advances along with a decrease in short-term FHLB weighted average cost and interest expense on deposits decreased $1.9 million as accounts repriced at a lower rate and transitioned to more money market accounts.
There was a provision for credit losses of $532,000 for the six months ended June 30, 2026 compared to a negative provision for credit losses of $532,000 for the six months ended June 30, 2025. The provision for credit losses of $532,000 consisted of a $411,000 provision related to loans and $121,000 provision related to unfunded commitments for the six months ended June 30, 2026. The increase was primarily due to increases in multi-family, commercial real estate, and construction loan balances along with an increase in multifamily and commercial real estate qualitative factors. The provision for credit losses related to unfunded loan commitments was due primarily to an increase in the loan pipeline balance at the current quarter end compared to the prior year end.
Compensation, payroll taxes, and other employee benefits expense increased $948,000 to $11.2 million for the six months ended June 30, 2026 compared to $10.2 million for the six months ended June 30, 2025. primarily due to increases in health insurance, salary expense from annual raises, variable compensation, restricted stock expense due to new directors and executive grants, and ESOP compensation as average share price has risen year-over-year.
Comparison of Mortgage Banking Segment Results of Operations for the Six Months Ended June 30, 2026 and 2025
Net income totaled $1.2 million for the six months ended June 30, 2026 compared to a net loss of $157,000 for the six months ended June 30, 2025. We originated $1.13 billion in mortgage loans held for sale (including sales to the community banking segment) during the six months ended June 30, 2026, which represents an increase of $153.6 million, or 15.7%, from the $976.6 million originated during the six months ended June 30, 2025. The increase in loan production volume was driven by a $47.3 million, or 5.4%, increase in purchase products and a $106.2 million, or 106.3%, increase in refinance products. Loans originated for the purchase of a residential property comprised 82.0% of total originations during the six months ended June 30, 2026, compared to 90.0% of total originations during the six months ended June 30, 2025, respectively. Total mortgage banking noninterest income increased $3.1 million, or 8.1%, to $41.5 million during the six months ended June 30, 2026 compared to $38.4 million during the six months ended June 30, 2025. The increase in mortgage banking noninterest income was related to a 15.7% increase in volume and was partially offset by a 7.0% decrease in gross margin on loans originated and sold for the six months ended June 30, 2026 compared to June 30, 2025. Gross margin on loans originated and sold is the ratio of mortgage banking income (excluding the change in interest rate lock fair value) divided by total loan originations. We sell loans on both a servicing-released and a servicing-retained basis. Waterstone Mortgage Corporation has contracted with a third party to service the loans for which we retain servicing.
Total compensation, payroll taxes and other employee benefits increased $2.7 million, or 9.4%, to $31.0 million for the six months ended June 30, 2026 compared to $28.4 million for the six months ended June 30, 2025. The increase primarily related to increased commission expense due to an increase in fundings, manager pay expense as profitability improved, production incentive expense, and salary expense offset by a decrease in health insurance expense.
Consolidated Waterstone Financial, Inc. Results of Operations
Net Interest Income
Average Balance Sheets, Interest and Yields/Costs
The following table sets forth average balance sheets, annualized average yields and costs, and certain other information for the periods indicated. Non-accrual loans are included in the computation of the average balances of loans receivable and held for sale. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense. Yields on interest-earning assets are computed on a fully tax-equivalent yield, where applicable.
__________
Rate/Volume Analysis
The following table sets forth the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionately based on the changes due to rate and the changes due to volume.
______________
Comparison of Financial Condition at March 31, 2026 and December 31, 2025
Total Assets – Total assets decreased by $8.3 million, or 0.4%, to $2.25 billion at March 31, 2026 from $2.26 billion at December 31, 2025. The decrease in total assets primarily reflects a decrease in cash and cash equivalents, partially offset by increases in loans receivable and securities available for sale.
Cash and Cash Equivalents – Cash and cash equivalents decreased $26.5 million, or 37.2%, to $44.7 million at March 31, 2026, compared to $71.1 million at December 31, 2025. The decrease in cash and cash equivalents primarily reflects the increase in loans receivable and securities available for sale.
SecuritiesNet Availableinterest for Sale – Securities available for saleincome increased $6.2$5.2 million, or 19.7%, to $31.5 million during the six months ended June 30, 2026 compared to $237.0$26.3 million atduring Marchthe 31,six 2026.months Theended increaseJune was30, 2025 primarily due to theincreased purchasesyields on our loan and securities portfolios as well as decreased cost of securities exceeding paydownsdeposits and maturities offset by a decrease in fair valueborrowings as longer term interestreplacement rates increaseddecreased compared to the prior year end.period.
Provision for Credit Losses
There was a provision for credit losses of $500,000 for the six months ended June 30, 2026 compared to a negative $567,000 provision for credit losses for the six months ended June 30, 2025. The $500,000 provision for credit losses consisted of a $379,000 provision related to loans and a provision related to unfunded commitments of $121,000 for the six months ended June 30, 2026. The increase was primarily due to increases in multi-family, commercial real estate, and construction loan balances along with an increase in multifamily and commercial real estate qualitative factors. The provision for credit losses related to unfunded loan commitments was due primarily to an increase in the loan pipeline balance at the current quarter end compared to the prior year end.
The provision is primarily a function of the Company's reserving methodology and assessments of certain quantitative and qualitative factors which are used to determine an appropriate allowance for credit losses for the period. See further discussion regarding the allowance for loan losses in the "Asset Quality" section for an analysis of charge-offs, nonperforming assets, specific reserves and additional provisions and the "Allowance for Credit Loss" section.
Noninterest Income
Total noninterest income increased $3.0 million or 7.3%, to $44.5 million during the three months ended June 30, 2026 compared to $41.4 million during the three months ended June 30, 2025.
Total noninterest expenses increased $2.5 million, or 4.6%, to $57.3 million during the six months ended June 30, 2026 compared to $54.7 million during the six months ended June 30, 2025.
Income Taxes
Income tax expense totaled $3.7 million for the six months ended June 30, 2026 compared to $2.8 million during the six months ended June 30, 2025. The increase was primarily due to the increase in pre-tax income. Income tax expense was recognized on the statement of income during the six months ended June 30, 2026 at an effective rate of 20.5% of pretax income compared to the six months ended June 30, 2025 at an effective rate of 20.6% of pretax income.
Comparison of Financial Condition at June 30, 2026 and December 31, 2025
Total Assets – Total assets decreased by $6.7 million, or 0.3%, to $2.25 billion at June 30, 2026 from $2.26 billion at December 31, 2025. The decrease in total assets primarily reflects a decrease in cash and cash equivalents, partially offset by increases in loans receivable, loans held for sale, and securities available for sale.
Cash and Cash Equivalents – Cash and cash equivalents decreased $32.9 million, or 46.3%, to $38.2 million at June 30, 2026, compared to $71.1 million at December 31, 2025. The decrease in cash and cash equivalents primarily reflects the increase in loans receivable, loans held for sale, and securities available for sale along with the decrease in deposits.
Loans Held for Sale - Loans held for sale decreased $707,000 to $144.4 million at March 31, 2026.
LoansSecurities Receivable - Loans receivable heldAvailable for investmentSale – Securities available for sale increased $8.8$6.5 million to $1.68$237.3 billionmillion at MarchJune 31,30, 2026. The increase in total loans receivable was primarily attributabledue to increasesthe in eachpurchases of thesecurities multi-family,exceeding commercial real estate, construction,paydowns and commercial loan categoriesmaturities offset by a decrease in thefair one-to-fourvalue familyas loanlonger category.term interest rates increased compared to prior year end.
Loans Held for Sale - Loans held for sale increased $6.6 to $151.7 million at June 30, 2026 as seasonal house buying activity increased.
Loans Receivable - Loans receivable held for investment increased $8.3 million to $1.68 billion at June 30, 2026. The increase in total loans receivable was primarily attributable to increases in each of the multi-family, construction, and commercial loan categories offset by decreases in the one-to-four family and commercial real estate loan categories.
Allowance for Credit Losses - Loans - The allowance for credit losses increased to $17.7$17.9 million at MarchJune 31,30, 2026. There was a $264,000$379,000 provision for credit losses - loans for the threesix months ended MarchJune 31,30, 2026. The provision for credit losses related to loans was primarily due to increases in multi-family and construction loan balances along with an increase in multifamily external qualitative factors. The provision for credit losses related to unfunded loan commitments for the quarter ended March 31, 2026 was due primarily to an increase in the loan pipeline balance at quarter end. See Note 3 - Loans Receivable of the notes to unaudited consolidated financial statements for further discussion on the allowance for credit losses. Additionally, net recoveries totaled $11,000 for the three months ended March 31, 2026.
Prepaid expenses and other assets – Total prepaid expenses and other assets increased $4.4$3.9 million to $42.3$41.9 million at MarchJune 31,30, 2026. The increase was primarily due to increases in mortgage investor receivables, accounts receivable, back-to-back loan swap fair value adjustment, and the deferred tax asset for unrealized losses as long term interest rates increased.
Deposits – Total deposits increaseddecreased $1.5$16.3 million to $1.44$1.42 billion at MarchJune 31,30, 2026. The increase was driven by a decrease of $37.2 million in time deposits offset by increases of $6.2$6.4 million in demand deposits and $13.5$14.5 million in money market and savings deposits offset by a decrease of $18.1 million in time deposits.
Borrowings – Total borrowings increaseddecreased $800,000,$258,000, or 0.2%,0.1%, to $413.0$412.0 million at MarchJune 31,30, 2026. The community banking segment increased its FHLB long-term borrowings by $83.0$103.0 million, decreased its short-term FHLB borrowings by $52.2$23.7 million, and paid off $30.0$80.0 million in long-term FHLB borrowings. External short-term borrowings at the mortgage banking segment decreasedincreased by a total of $30,000$435,000 at MarchJune 31,30, 2026 from December 31, 2025.
Advance Payments by Borrowers for Taxes - Advance payments by borrowers for taxes increased $8.1$15.8 million to $11.1$18.8 million at MarchJune 31,30, 2026. The increase was the result of payments received from borrowers for their real estate taxes and is seasonally normal, as balances increase during the course of the calendar year until real estate tax obligations are paid in the fourth quarter.
Other Liabilities - Other liabilities decreased $17.5$7.7 million to $40.1$49.9 million at MarchJune 31,30, 2026. Other liabilities decreased primarily due to a seasonal decrease in outstanding checks related to advance payments by borrowers for taxes. The Company receives payments from borrowers for their real estate taxes during the course of the calendar year until real estate tax obligations are paid in the fourth quarter. At the time at which the disbursements are made, the outstanding checks are classified as other liabilities in the statements of financial condition, and these amounts remain classified as other liabilities until settled.
Shareholders’ Equity – Shareholders' equity decreasedincreased $1.2$1.7 million to $348.2$351.1 million at MarchJune 31,30, 2026. Shareholders' equity decreasedincreased primarily due to decreasesnet income offset by a decrease in the fair value of securities, shares repurchased, and dividends declared during the period.
Total non-accrual loans increased by $1.3 million, or 21.2%, to $7.5 million as of March 31, 2026 compared to $6.2 million as of December 31, 2025. The ratio of non-accrual loans to total loans receivable was 0.44% at March 31, 2026 and 0.37% at December 31, 2025. During the three months ended March 31, 2026, $2.7 million in loans were placed on non-accrual status. Offsetting this activity, $692,000 in loans returned to accrual status and $664,000 in principal payments were received during the three months ended March 31, 2026.
Of the $7.5$6.5 million in total non-accrual loans as of MarchJune 31,30, 2026, $5.1$4.7 million in loans have been specifically reviewed to assess whether a specific valuation allowance is necessary. A specific valuation allowance is established for an amount equal to the impairment when the carrying value of the loan exceeds the present value of expected future cash flows, discounted at the loan's original effective interest rate or the fair value of the underlying collateral with an adjustment made for costs to dispose of the asset. Based upon these specific reviews, no charge-offs have been recorded over the life of these loans and there were no specific reserves as of MarchJune 31,30, 2026. The remaining $2.4$1.8 million of non-accrual loans were reviewed on an aggregate basis as of MarchJune 31,30, 2026.
The outstanding principal balance of our five largest non-accrual loans as of MarchJune 31,30, 2026 totaled $3.2 million, which represents 42.6%48.9% of total non-accrual loans as of that date. The loans held for investment at the mortgage segment were reviewed on an aggregate basis.
WSBF insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 2 filings (2 insiders, 2 trade dates, 18,157 shares, about $355.8K). Net open-market shares: -18,157 (purchases minus sales); net value about -$355.8K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-13 | Gordon Ryan J |
Open-market sale | 1,300 | $21.11 | $27.4K |
| 2026-08-13 | Gordon Ryan J |
Open-market sale | 6,237 | $21.15 | $131.9K |
| 2026-08-13 | Gordon Ryan J |
Open-market sale | 620 | $21.10 | $13.1K |
| 2026-08-13 | Gordon Ryan J |
Option exercise | 10,000 | $17.20 | $172.0K |
| 2026-05-21 | Gerke Mark Raymond |
Option exercise | 10,000 | $14.98 | $149.8K |
| 2026-05-21 | Gerke Mark Raymond |
Open-market sale | 10,000 | $18.34 | $183.4K |
Well-known investors holding WSBF (13F)
None of the 59 investors we track reported a position in their latest 13F.