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What changed in Waterstone Financial, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Waterstone Financial, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+286 added−289 removedSource: 10-K (2025-02-28) vs 10-K (2024-03-06)

Top changes in Waterstone Financial, Inc.'s 2024 10-K

286 paragraphs added · 289 removed · 245 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

131 edited+2 added−20 removed244 unchanged
Biggest changeAt December 31, 2023 2022 2021 Allowance for Credit Losses - Loans (1) % of Loans in Category to Total Loans % of Allowance in Category to Total Allowance Allowance for Loan Losses - Loans (1) % of Loans in Category to Total Loans % of Allowance in Category to Total Allowance Allowance for Loan Losses - Loans (1) % of Loans in Category to Total Loans % of Allowance in Category to Total Allowance (Dollars in Thousands) Real estate: Residential One- to four-family $ 6,886 33.12 % 37.12 % $ 4,743 31.09 % 26.71 % $ 3,963 24.92 % 25.12 % Multi family 7,318 42.53 % 39.45 % 7,975 44.90 % 44.91 % 5,398 44.62 % 34.21 % Home equity 211 0.79 % 1.14 % 174 0.76 % 0.98 % 89 0.91 % 0.56 % Construction and land 983 3.21 % 5.30 % 1,352 4.14 % 7.61 % 1,386 6.85 % 8.78 % Commercial real estate 2,561 18.08 % 13.81 % 3,199 17.41 % 18.02 % 4,482 20.79 % 28.41 % Commercial 534 2.23 % 2.88 % 267 1.65 % 1.50 % 427 1.85 % 2.71 % Consumer 56 0.04 % 0.30 % 47 0.05 % 0.26 % 33 0.06 % 0.21 % Total allowance for credit losses - loans (1) $ 18,549 100.00 % 100.00 % $ 17,757 100.00 % 100.00 % $ 15,778 100.00 % 100.00 % (1) The Company adopted ASU 2016-13 as of January 1, 2022. 2021 amounts presented are calculated under the prior accounting standard.
Biggest changeAt December 31, 2024 2023 2022 Allowance for Credit Losses - Loans % of Loans in Category to Total Loans % of Allowance in Category to Total Allowance Allowance for Credit Losses - Loans % of Loans in Category to Total Loans % of Allowance in Category to Total Allowance Allowance for Credit Losses - Loans % of Loans in Category to Total Loans % of Allowance in Category to Total Allowance (Dollars in Thousands) Real estate: Residential One- to four-family $ 5,286 30.71 % 28.97 % $ 6,886 33.12 % 37.12 % $ 4,743 31.09 % 26.71 % Multi family 7,079 44.12 % 38.80 % 7,318 42.53 % 39.45 % 7,975 44.90 % 44.91 % Home equity 212 0.78 % 1.16 % 211 0.79 % 1.14 % 174 0.76 % 0.98 % Construction and land 1,205 3.66 % 6.60 % 983 3.21 % 5.30 % 1,352 4.14 % 7.61 % Commercial real estate 3,920 18.65 % 21.48 % 2,561 18.08 % 13.81 % 3,199 17.41 % 18.02 % Commercial 466 2.03 % 2.55 % 534 2.23 % 2.88 % 267 1.65 % 1.50 % Consumer 79 0.05 % 0.43 % 56 0.04 % 0.30 % 47 0.05 % 0.26 % Total allowance for credit losses - loans $ 18,247 100.00 % 100.00 % $ 18,549 100.00 % 100.00 % $ 17,757 100.00 % 100.00 % Our underwriting policies and procedures emphasize that credit decisions must rely on both the credit quality of the borrower and the estimated value of the underlying collateral.
Acquired in 2006, Waterstone Mortgage Corporation is a mortgage banking business with offices in 26 states. It has its own board of directors currently comprised of its President, its Chief Financial Officer, its Chief Operating Officer, the WaterStone Bank Chief Executive Officer, President, Chief Financial Officer, Chief Credit Officer, and a member of the WaterStone Bank Board of Directors.
Acquired in 2006, Waterstone Mortgage Corporation is a mortgage banking business with offices in 26 states. It has its own board of directors currently comprised of its President, its Chief Financial Officer, its Chief Operating Officer, the WaterStone Bank Chief Executive Officer, Chief Financial Officer, Chief Credit Officer, and a member of the WaterStone Bank Board of Directors.
If the remaining book value is not deemed to be fully collectible, all payments received are applied to unpaid principal.
If the remaining book value is not deemed to be fully collectible, all payments received are applied to unpaid principal.
Determination as to the ultimate collectability of the remaining book value is supported by an updated credit department evaluation of the borrower's financial condition and prospects for repayment, including consideration of the borrower's sustained historical repayment performance and other relevant factors.
Determination as to the ultimate collectability of the remaining book value is supported by an updated credit department evaluation of the borrower's financial condition and prospects for repayment, including consideration of the borrower's sustained historical repayment performance and other relevant factors.
Investments in mortgage-backed securities involve a risk that actual prepayments may differ from estimated prepayments over the life of the security, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments, thereby changing the net yield on such securities.
Investments in mortgage-backed securities involve a risk that actual prepayments may differ from estimated prepayments over the life of the security, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments, thereby changing the net yield on such securities.
Aggregate loans by a savings bank to its insiders and insiders’ related interests in the aggregate may not exceed the savings bank’s unimpaired capital and unimpaired surplus.
Loans by a savings bank to its insiders and insiders’ related interests in the aggregate may not exceed the savings bank’s unimpaired capital and unimpaired surplus.
These laws, regulations and judicial and administrative decisions to which Waterstone Mortgage Corporation is subject include those pertaining to: real estate settlement procedures; fair lending; fair credit reporting; truth in lending; compliance with net worth and financial statement delivery requirements; compliance with federal and state disclosure and licensing requirements; the establishment of maximum interest rates, finance charges and other charges; secured transactions; collection, foreclosure, repossession and claims-handling procedures; other trade practices and privacy regulations providing for the use and safeguarding of non-public personal financial information of borrowers; and guidance on non-traditional mortgage loans issued by the federal financial regulatory agencies. - 25 - Holding Company Regulation Waterstone Financial is a unitary savings and loan holding company subject to regulation and supervision by the Federal Reserve Board.
These laws, regulations and judicial and administrative decisions to which Waterstone Mortgage Corporation is subject include those pertaining to: real estate settlement procedures; fair lending; fair credit reporting; truth in lending; compliance with net worth and financial statement delivery requirements; compliance with federal and state disclosure and licensing requirements; the establishment of maximum interest rates, finance charges and other charges; secured transactions; collection, foreclosure, repossession and claims-handling procedures; unfair and deceptive practices; other trade practices and privacy regulations providing for the use and safeguarding of non-public personal financial information of borrowers; and guidance on non-traditional mortgage loans issued by the federal financial regulatory agencies. - 25 - Holding Company Regulation Waterstone Financial is a unitary savings and loan holding company subject to regulation and supervision by the Federal Reserve Board.
A savings and loan holding company may not acquire a savings institution in another state and hold the target institution as a separate subsidiary unless it is a supervisory acquisition under Section 13(k) of the Federal Deposit Insurance Act or the law of the state in which the target is located authorizes such acquisitions by out-of-state companies.
A savings and loan holding company may not acquire a savings association in another state and hold the target institution as a separate subsidiary unless it is a supervisory acquisition under Section 13(k) of the Federal Deposit Insurance Act or the law of the state in which the target is located authorizes such acquisitions by out-of-state companies.
Established in 1998, Wauwatosa Investments, Inc. operates in Nevada as WaterStone Bank’s investment subsidiary. This wholly-owned subsidiary owns and manages the majority of the consolidated investment portfolio. It has its own board of directors currently comprised of its President, the WaterStone Bank Chief Financial Officer, Treasury Officer and the Chairman of Waterstone Financial’s board of directors. Waterstone Mortgage Corporation.
Established in 1998, Wauwatosa Investments, Inc. operates in Nevada as WaterStone Bank’s investment subsidiary. This wholly-owned subsidiary owns and manages the majority of the consolidated investment portfolio. It has its own board of directors currently comprised of its President, the WaterStone Bank Chief Financial Officer, and the Chairman of Waterstone Financial’s board of directors. Waterstone Mortgage Corporation.
Federal law prohibits a savings and loan holding company, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings institution or savings and loan holding company without prior written approval of the Federal Reserve Board, and from acquiring or retaining control of any depository institution not insured by the Federal Deposit Insurance Corporation.
Federal law prohibits a savings and loan holding company, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings association or savings and loan holding company without prior written approval of the Federal Reserve Board, and from acquiring or retaining control of any depository institution not insured by the Federal Deposit Insurance Corporation.
The Federal Reserve Board promulgated regulations implementing the "source of strength" policy, which requires holding companies to act as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.
The Federal Reserve Board promulgated regulations implementing the "source of strength" policy, which requires holding companies to act as a source of strength to their subsidiary depository institutions by providing capital, liquidity, managerial, and other support in times of financial stress.
The Federal Deposit Insurance Corporation will not approve an activity that it determines presents a significant risk to the Federal Deposit Insurance Corporation insurance fund. The current activities of WaterStone Bank and its subsidiaries are permissible under applicable federal regulations.
The Federal Deposit Insurance Corporation will not approve an activity that it determines presents a significant risk to the Federal Deposit Insurance Corporation's Deposit Insurance Fund. The current activities of WaterStone Bank and its subsidiaries are permissible under applicable federal regulations.
The Federal Reserve Board has enforcement authority over Waterstone Financial and its non-savings institution subsidiaries. Among other things, that authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a risk to WaterStone Bank.
The Federal Reserve Board has enforcement authority over Waterstone Financial and its non-savings bank subsidiaries. Among other things, that authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a risk to WaterStone Bank.
WaterStone Bank funds its loan production primarily with retail deposits and Federal Home Loan Bank advances. Our deposit offerings include certificates of deposit, money market savings accounts, transaction deposit accounts, noninterest bearing demand accounts and individual retirement accounts.
WaterStone Bank funds its loan production primarily with retail deposits, brokered deposits, and Federal Home Loan Bank advances. Our deposit offerings include certificates of deposit, money market savings accounts, transaction deposit accounts, noninterest bearing demand accounts and individual retirement accounts.
In assessing an institution’s capital adequacy, the Federal Deposit Insurance Corporation takes into consideration, not only these numeric factors, but qualitative factors as well, including the bank’s exposure to interest rate risk.
In assessing an institution’s capital adequacy, the Federal Deposit Insurance Corporation takes into consideration, not only these numeric factors, but qualitative factors as well, including a bank’s exposure to interest rate risk.
Federal regulations require annual on-site examinations for all depository institutions except certain well-capitalized and highly rated institutions with assets of less than $3 billion which are examined every 18 months. - 24 - Customer Privacy Under Wisconsin and federal law and regulations, savings banks, such as WaterStone Bank, are required to develop and maintain privacy policies relating to information on its customers, restrict access to and establish procedures to protect customer data.
Federal regulations require annual on-site examinations for all depository institutions except certain well-capitalized and highly rated institutions with assets of less than $3 billion which are examined every 18 months. - 24 - Customer Privacy Under Wisconsin and federal law and regulations, savings banks, such as WaterStone Bank, are required to develop and maintain privacy policies relating to its customers' information, and to restrict access to and establish procedures to protect customer data.
The Inflation Reduction Act, which was signed into law on August 16, 2022, among other things, implements a new alternative minimum tax of 15% on corporations with profits in excess of $1 billion, a 1% excise tax on stock repurchases, and several tax incentives to promote clean energy and climate initiatives. These provisions are effective beginning January 1, 2023.
The Inflation Reduction Act, which was signed into law on August 16, 2022, among other things, implements a new alternative minimum tax of 15% on corporations with profits in excess of $1 billion, a 1% excise tax on stock repurchases, and several tax incentives to promote clean energy and climate initiatives. These provisions were effective beginning January 1, 2023.
At December 31, 2023, WaterStone Bank did not have any loans which exceeded the “loans-to-one borrower” limitations. In addition, under Wisconsin law, WaterStone Bank must qualify for and maintain a level of qualified thrift investments equal to 60% of its assets as prescribed in Section 7701(a)(19) of the Internal Revenue Code of 1986, as amended.
At December 31, 2024, WaterStone Bank did not have any loans which exceeded the “loans-to-one borrower” limitations. In addition, under Wisconsin law, WaterStone Bank must qualify for and maintain a level of qualified thrift investments equal to 60% of its assets as prescribed in Section 7701(a)(19) of the Internal Revenue Code of 1986, as amended.
These five loans did not have any charge-offs or require any specific valuation allowances as of December 31, 2023. Interest payments received are treated as interest income on a cash basis as long as the remaining book value of the loan (i.e., after charge-off of all identified losses) is deemed to be fully collectible.
These five loans did not have any charge-offs or require any specific valuation allowances as of December 31, 2024. Interest payments received are treated as interest income on a cash basis as long as the remaining book value of the loan (i.e., after charge-off of all identified losses) is deemed to be fully collectible.
The exact amount of assets a savings bank is required to maintain as liquid assets is set by the WDFI, but generally ranges from 4% to 15% of the savings bank’s average daily balance of net withdrawable accounts plus short-term borrowings (the “Required Liquidity Ratio”). At December 31, 2023, WaterStone Bank’s Required Liquidity Ratio was 8.0%.
The exact amount of assets a savings bank is required to maintain as liquid assets is set by the WDFI, but generally ranges from 4% to 15% of the savings bank’s average daily balance of net withdrawable accounts plus short-term borrowings (the “Required Liquidity Ratio”). At December 31, 2024, WaterStone Bank’s Required Liquidity Ratio was 8.0%.
The composition and maturities of the debt securities portfolio at December 31, 2023 are summarized in the following table. Maturities are based on the final contractual payment dates and do not reflect the impact of prepayments or early redemptions that may occur. Municipal obligation yields have not been adjusted to a tax-equivalent basis.
The composition and maturities of the debt securities portfolio at December 31, 2024 are summarized in the following table. Maturities are based on the final contractual payment dates and do not reflect the impact of prepayments or early redemptions that may occur. Municipal obligation yields have not been adjusted to a tax-equivalent basis.
At December 31, 2023, our total federal pre-base year bad debt reserve was approximately $16.7 million. - 27 - Corporate Dividends-Received Deduction. Waterstone Financial may exclude from its federal taxable income 100% of dividends received from WaterStone Bank as a wholly-owned subsidiary by filing consolidated tax returns.
At December 31, 2024, our total federal pre-base year bad debt reserve was approximately $16.7 million. - 27 - Corporate Dividends-Received Deduction. Waterstone Financial may exclude from its federal taxable income 100% of dividends received from WaterStone Bank as a wholly-owned subsidiary by filing consolidated tax returns.
We also offer stock-based compensation to certain management personnel as a way to attract and retain key talent. See Note 10 - Stock Based Compensation, Note 11 - Employee Benefit Plans, and Note 12 - Employee Stock Ownership Plan to the Consolidated Financial Statements included under Item 8 for further discussion of our stock-based compensation and benefit plans.
We also offer stock-based compensation to certain management personnel as a way to attract and retain key talent. See Note 9 - Stock Based Compensation, Note 10 - Employee Benefit Plans, and Note 11 - Employee Stock Ownership Plan to the Consolidated Financial Statements included under Item 8 for further discussion of our stock-based compensation and benefit plans.
In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board must consider such things as the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on and the risk to the deposit insurance fund, the convenience and needs of the community and competitive factors.
In evaluating applications by holding companies to acquire savings associations, the Federal Reserve Board must consider such things as the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on and the risk to the Deposit Insurance Fund, the convenience and needs of the community and competitive factors.
Based upon these specific reviews, no charge-offs have been recorded over the life of these loans as of December 31, 2023. Partially charged-off loans measured for impairment based upon net realizable collateral value are maintained in a “non-performing” status. There were no specific reserves, as of December 31, 2023.
Based upon these specific reviews, no charge-offs have been recorded over the life of these loans as of December 31, 2024. Partially charged-off loans measured for impairment based upon net realizable collateral value are maintained in a “non-performing” status. There were no specific reserves as of December 31, 2024.
Home Equity Loans and Lines of Credit . We also offer home equity loans and home equity lines of credit, both of which are secured by owner-occupied and non-owner occupied one- to four-family residences. At December 31, 2023, outstanding home equity loans and equity lines of credit totaled $13.2 million, or 0.8% of total loans outstanding.
Home Equity Loans and Lines of Credit . We also offer home equity loans and home equity lines of credit, both of which are secured by owner-occupied and non-owner occupied one- to four-family residences. At December 31, 2024, outstanding home equity loans and equity lines of credit totaled $13.2 million, or 0.8% of total loans outstanding.
At December 31, 2023, WaterStone Bank had no reserves subject to recapture in excess of its base year. Waterstone Financial is required to use the specific charge-off method to account for tax bad debt deductions. Taxable Distributions and Recapture.
At December 31, 2024, WaterStone Bank had no reserves subject to recapture in excess of its base year. Waterstone Financial is required to use the specific charge-off method to account for tax bad debt deductions. Taxable Distributions and Recapture.
At December 31, 2023 2022 Accruing Non-accruing Accruing Non-accruing (In Thousands) One- to four-family $ - $ 543 $ - $ 936 $ - $ 543 $ - $ 936 Interest payments received on non-accrual financing receivables whose borrowers are experiencing financial difficulty are treated as interest income on a cash basis as long as the remaining book value of the loan (i.e., after charge-off of all identified losses) is deemed to be fully collectible.
At December 31, 2024 2023 Accruing Non-accruing Accruing Non-accruing (In Thousands) One- to four-family $ - $ - $ - $ 543 $ - $ - $ - $ 543 Interest payments received on non-accrual financing receivables whose borrowers are experiencing financial difficulty are treated as interest income on a cash basis as long as the remaining book value of the loan (i.e., after charge-off of all identified losses) is deemed to be fully collectible.
There were no accruing loans past due 90 days or more during the years ended December 31, 2023 or December 31, 2022. Financial receivables whose borrowers are experiencing financial difficulty. The following table summarizes financial receivables whose borrowers are experiencing financial difficulty by the Company’s internal risk rating.
There were no accruing loans past due 90 days or more during the years ended December 31, 2024 or December 31, 2023. Financial receivables whose borrowers are experiencing financial difficulty. The following table summarizes financial receivables whose borrowers are experiencing financial difficulty by the Company’s internal risk rating.
During the years ended December 31, 2023, 2022, and 2021, no investment securities were sold. - 15 - Available for Sale Portfolio Mortgage-backed Securities and Collateralized Mortgage Obligations. We purchase mortgage-backed securities and collateralized mortgage obligations guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.
During the years ended December 31, 2024, 2023, and 2022, no investment securities were sold. - 15 - Available for Sale Portfolio Mortgage-backed Securities and Collateralized Mortgage Obligations. We purchase mortgage-backed securities and collateralized mortgage obligations guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.
In addition, the Savings and Loan Holding Company Act provides that no company may acquire control of a savings and loan holding company (as “control” is defined for purposes of that statute) without the prior approval of the Federal Reserve Board.
In addition, the Home Owners’ Loan Act provides that no company may acquire control of a savings and loan holding company (as “control” is defined for purposes of that statute) without the prior approval of the Federal Reserve Board.
Under the regulations, a bank is deemed to be (i) "well capitalized" if it has total risk-based capital ratio of 10.0% or more, has a Tier 1 risk-based capital ratio of 8.0% or more, has a Tier 1 leveraged capital ratio of 5.0% or more and a common equity Tier 1 ratio of 6.5% or more, and is not subject to any written capital order or directive; (ii) "adequately capitalized" if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 6.0% or more, a Tier 1 leveraged capital ratio of 4.0% or more and a common equity Tier 1 capital ratio of 4.5% or more, and does not meet the definition of "well capitalized"; (iii) "undercapitalized" if it has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio that is less than 6.0%, a Tier 1 leverage capital ratio that is less than 4.0%, a Tier 1 leverage capital ratio that is less than 3.0%, or a common equity Tier 1 capital ratio of less than 4.5%; (iv) "significantly undercapitalized" if it has a total risk-based capital ratio that is less than 6.0% and a Tier 1 risk-based capital ratio that is less than 4.0% or a common equity Tier 1 ratio of less than 3.0%; and (v) "critically undercapitalized" if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%. - 22 - Federal law and regulations also specify circumstances under which a federal banking agency may reclassify a well capitalized institution as adequately capitalized and may require an institution classified as less than well capitalized to comply with supervisory actions as if it were in the next lower category (except that the Federal Deposit Insurance Corporation may not reclassify a significantly undercapitalized institution as critically undercapitalized).
Under the implementing regulations, a bank is deemed to be (i) "well capitalized" if it has total risk-based capital ratio of 10.0% or more, has a Tier 1 risk-based capital ratio of 8.0% or more, has a Tier 1 leverage ratio of 5.0% or more and a common equity Tier 1 ratio of 6.5% or more, and is not subject to any written agreement, order or capital or prompt corrective action directive; (ii) "adequately capitalized" if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 6.0% or more, a Tier 1 leverage ratio of 4.0% or more and a common equity Tier 1 capital ratio of 4.5% or more, and does not meet the definition of "well capitalized"; (iii) "undercapitalized" if it has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio that is less than 6.0%, a Tier 1 leverage ratio that is less than 4.0%, or a common equity Tier 1 capital ratio of less than 4.5%; (iv) "significantly undercapitalized" if it has a total risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital ratio that is less than 4.0%, a Tier 1 leverage ratio that is less than 3.0%, or a common equity Tier 1 ratio of less than 3.0%; and (v) "critically undercapitalized" if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%. - 22 - Federal law and regulations also specify circumstances under which a federal banking agency may reclassify a well capitalized institution as adequately capitalized and may require an institution classified as less than well capitalized to comply with supervisory actions as if it were in the next lower category (except that the Federal Deposit Insurance Corporation may not reclassify a significantly undercapitalized institution as critically undercapitalized).
Loan officers, with concurrence from independent credit officers and underwriters, are authorized to approve and close any loan that qualifies under WaterStone Bank underwriting guidelines within the following lending limits: ● Any secured mortgage loan up to $500,000 for a borrower with total outstanding loans from us of less than $1.0 million that is independently underwritten can be approved by the Chief Credit Officer or select lending personnel. ● Any secured mortgage loan up to $1.0 million can be approved by the Chief Executive Officer. ● Any secured mortgage loan ranging from $500,001 to $3.0 million or any new loan to a borrower with outstanding loans from us exceeding $1.0 million must be approved by the Officer Loan Committee. ● Any non-real estate loan up to $250,000 for a borrower with total outstanding loans from us of less than $250,000 that is independently underwritten can be approved by select lending personnel. ● Any non-real estate loan up to $500,000 for a borrower with total outstanding loans from us of less than $500,000 that is independently underwritten can be approved by the Chief Executive Officer or Business Banking Manager. ● Any non-real estate loan ranging from $500,001 to $3.0 million or any new non-real estate loan to a borrower with outstanding loans exceeding $500,000 must be approved by the Officer Loan Committee. ● Any new loan over $3.0 million must be approved by the Officer Loan Committee and the board of directors prior to closing.
Loan officers, with concurrence from independent credit officers and underwriters, are authorized to approve and close any loan that qualifies under WaterStone Bank underwriting guidelines within the following lending limits: ● Any secured mortgage loan up to $500,000 for a borrower with total outstanding loans from us of less than $1.0 million that is independently underwritten can be approved by the Chief Credit Officer or select lending personnel. ● Any secured mortgage loan up to $1.0 million can be approved by any of the two the Chief Executive Officer, Chief Credit Officer, or select lending personnel. ● Any secured mortgage loan ranging from $500,001 to $3.0 million or any new loan to a borrower with outstanding loans from us exceeding $1.0 million must be approved by the Officer Loan Committee. ● Any non-real estate loan up to $500,000 for a borrower with total outstanding loans from us of less than $500,000 that is independently underwritten can be approved by the Chief Executive Officer or Chief Credit Officer. ● Any non-real estate loan ranging from $500,001 to $3.0 million or any new non-real estate loan to a borrower with outstanding loans exceeding $500,000 must be approved by the Officer Loan Committee. ● Any new loan over $3.0 million must be approved by the Officer Loan Committee and the board of directors prior to closing.
The overall increase was related primarily to the one- to four-family category. See Note 3 of the notes to the consolidated financial statements for further discussion on the allowance for credit losses - loans.
The overall decrease was related primarily to the one- to four-family category. See Note 3 of the notes to the consolidated financial statements for further discussion on the allowance for credit losses - loans.
The Company does not have uninsured deposits less than $250,000 in aggregate balance. The following table sets forth the maturity of uninsured certificates of deposits at December 31, 2023 and 2022.
The Company does not have uninsured deposits less than $250,000 in aggregate balance. The following table sets forth the maturity of uninsured certificates of deposits at December 31, 2024 and 2023.
Treasury and the Federal Reserve Board; • our ability to manage market risk, credit risk and operational risk in the current economic conditions; • our ability to enter new markets successfully and capitalize on growth opportunities; • our ability to successfully integrate acquired entities; • decreased demand for our products and services; • changes in tax policies or assessment policies; • changes in consumer demand, spending, borrowing and savings habits; • changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; • our ability to attract and retain key employees; • cyber attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information and destroy data or disable our systems; • technological changes that may be more difficult or expensive than expected; • the ability of third-party providers to perform their obligations to us; • the effects of federal government shutdown; • the effects of any national or international war, conflict, or act of terrorism; • the ability of the U.S.
Treasury and the Federal Reserve Board; • our ability to manage market risk, credit risk and operational risk in the current economic conditions; • our ability to enter new markets successfully and capitalize on growth opportunities; • our ability to successfully integrate acquired entities; • decreased demand for our products and services; • changes in tax policies or assessment policies; • changes in liquidity, including the size and composition of our deposit portfolio, and the percentage of uninsured deposits in the portfolio; • changes in consumer demand, spending, borrowing and savings habits; • changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; • our ability to attract and retain key employees; • cyber attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information and destroy data or disable our systems; • technological changes that may be more difficult or expensive than expected; • the ability of third-party providers to perform their obligations to us; • the effects of federal government shutdown; • the effects of any national or international war, conflict, or act of terrorism; • the ability of the U.S.
Any company that acquires such control becomes a “savings and loan holding company” subject to registration, examination and regulation by the Federal Reserve Board. Effective September 30, 2020, the Federal Reserve Board adopted changes to its regulatory definition of “control” under the Savings and Loan Holding Company Act.
Any company that acquires such control becomes a “savings and loan holding company” subject to registration, examination and regulation by the Federal Reserve Board. Effective September 30, 2020, the Federal Reserve Board adopted changes to its regulatory definition of “control” under the Home Owners’ Loan Act.
On a consolidated basis, Waterstone Mortgage Corporation originated $2.02 billion in mortgage loans held for sale during the year ended December 31, 2023, which excludes the loans originated from Waterstone Mortgage Corporation and purchased by WaterStone Bank. Subsidiary Activities Waterstone Financial currently has one wholly-owned subsidiary, WaterStone Bank, which in turn has three wholly-owned subsidiaries.
On a consolidated basis, Waterstone Mortgage Corporation originated $2.13 billion in mortgage loans held for sale during the year ended December 31, 2024, which excludes the loans originated from Waterstone Mortgage Corporation and purchased by WaterStone Bank. Subsidiary Activities Waterstone Financial currently has one wholly-owned subsidiary, WaterStone Bank, which in turn has three wholly-owned subsidiaries.
Checking accounts, NOW accounts, Super NOW checking accounts, and certain other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to Regulation D reserve requirements, as are any non-personal time deposits (including certain money market deposit accounts) at a savings institution.
Checking accounts, NOW accounts, Super NOW checking accounts, and certain other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to Regulation D reserve requirements, as are any non-personal time deposits (including certain money market deposit accounts).
At December 31, 2023, our Government sponsored enterprise bond portfolio totaled $2.3 million, all of which were issued by Federal National Mortgage Association ("Fannie Mae") and were classified as available for sale. The weighted average yield on these securities was 0.60% and the weighted average remaining average life was 1.7 years at December 31, 2023.
At December 31, 2024, our Government sponsored enterprise bond portfolio totaled $2.4 million, all of which were issued by Federal National Mortgage Association ("Fannie Mae") and were classified as available for sale. The weighted average yield on these securities was 0.60% and the weighted average remaining average life was 0.7 years at December 31, 2024.
WaterStone Bank, as a member of the Federal Home Loan Bank of Chicago, is required to acquire and hold shares of capital stock in the Federal Home Loan Bank of Chicago in specified amounts. WaterStone Bank is in compliance with this requirement with an investment in Federal Home Loan Bank of Chicago stock of $20.9 million at December 31, 2023.
WaterStone Bank, as a member of the Federal Home Loan Bank of Chicago, is required to acquire and hold shares of capital stock in the Federal Home Loan Bank of Chicago in specified amounts. WaterStone Bank is in compliance with this requirement with an investment in Federal Home Loan Bank of Chicago stock of $20.3 million at December 31, 2024.
WaterStone Bank also has an active mortgage banking subsidiary, Waterstone Mortgage Corporation, which had 72 offices in 26 states as of December 31, 2023. WaterStone Bank conducts its community banking business from 14 banking offices located in Milwaukee, Washington and Waukesha counties, Wisconsin.
WaterStone Bank also has an active mortgage banking subsidiary, Waterstone Mortgage Corporation, which had 66 offices in 26 states as of December 31, 2024. WaterStone Bank conducts its community banking business from 14 banking offices located in Milwaukee, Washington and Waukesha counties, Wisconsin.
We do not necessarily expect to realize losses on potential problem loans, but we recognize potential problem loans carry a higher probability of default and require additional attention by management. The aggregate principal amounts of potential problem loans as of December 31, 2023 and 2022 were $6.8 million and $5.5 million, respectively.
We do not necessarily expect to realize losses on potential problem loans, but we recognize potential problem loans carry a higher probability of default and require additional attention by management. The aggregate principal amounts of potential problem loans as of December 31, 2024 and 2023 were $13.3 million and $6.8 million, respectively.
We also require homeowner’s insurance and where circumstances warrant, flood insurance, on properties securing real estate loans. The average one- to four-family first mortgage loan balance was approximately $300,000 on December 31, 2023, and the largest outstanding balance on that date was $5.8 million, which is a consolidation loan that is collateralized by 80 single family properties.
We also require homeowner’s insurance and where circumstances warrant, flood insurance, on properties securing real estate loans. The average one- to four-family first mortgage loan balance was approximately $302,000 on December 31, 2024, and the largest outstanding balance on that date was $5.7 million, which is a consolidation loan that is collateralized by 80 single family properties.
While these securities generally provide lower yields than other investments in our securities investment portfolio, we maintain these investments, to the extent appropriate, for liquidity purposes and prepayment protection. The estimated fair value of our government sponsored enterprise bond portfolio at December 31, 2023 was $152,000 less than the amortized cost of $2.5 million.
While these securities generally provide lower yields than other investments in our securities investment portfolio, we maintain these investments, to the extent appropriate, for liquidity purposes and prepayment protection. The estimated fair value of our government sponsored enterprise bond portfolio at December 31, 2024 was $60,000 less than the amortized cost of $2.5 million. Municipal Obligations.
Offsetting this activity, $3.2 million in loans were placed on non-accrual status during the year ended December 31, 2023. Of the $4.8 million in total non-accrual loans as of December 31, 2023, $2.5 million in loans have been specifically reviewed to assess whether a specific valuation allowance is necessary.
Offsetting this activity, $3.4 million in loans were placed on non-accrual status during the year ended December 31, 2024. Of the $5.7 million in total non-accrual loans as of December 31, 2024, $3.5 million in loans have been specifically reviewed to assess whether a specific valuation allowance is necessary.
As of June 30, 2023, based on the FDIC annual Summary of Deposits Report, we had the 12th largest market share in our metropolitan statistical area out of 45 financial institutions, representing 1.6% of all deposits. Our competition for loans and deposits comes principally from commercial banks, savings institutions, mortgage banking firms and credit unions.
As of June 30, 2024, based on the FDIC annual Summary of Deposits Report, we had the 12th largest market share in our metropolitan statistical area out of 44 financial institutions, representing 1.7% of all deposits. Our competition for loans and deposits comes principally from commercial banks, savings institutions, mortgage banking firms and credit unions.
Under Wisconsin law, WaterStone Bank is required to obtain and maintain insurance on its deposits from a deposit insurance corporation. The deposits of WaterStone Bank are insured up to the applicable limits by the Federal Deposit Insurance Corporation. Federal Law and Regulation.
Under Wisconsin law, WaterStone Bank is required to obtain and maintain insurance on its deposits from a deposit insurance corporation. The deposits of WaterStone Bank are insured up to applicable limits by the Federal Deposit Insurance Corporation. Federal Law and Regulation. WaterStone Bank is a member of the Deposit Insurance Fund, which is administered by the Federal Deposit Insurance Corporation.
As of December 31, 2023, Waterstone Mortgage Corporation had 15 offices in Florida, nine offices in New Mexico, four offices in each of Arizona, Virginia, and Wisconsin, three offices in each of California, Maryland, New Hampshire, Oklahoma, and Texas, two offices in each of Delaware, Idaho, Kansas, Minnesota, and South Carolina, and one office in each of Colorado, Connecticut, Iowa, Illinois, Kentucky, Massachusetts, Michigan, Missouri, New Jersey, Rhode Island, and Tennessee. - 3 - Competition WaterStone Bank .
As of December 31, 2024, Waterstone Mortgage Corporation had nine offices in Florida, eight offices in New Mexico, six offices each in Virginia and Wisconsin, four offices each in Arizona, Oklahoma, and Texas, three offices in New Hampshire, two offices each in California, Idaho, Maryland, and Minnesota, and one office each in Colorado, Connecticut, Delaware, Iowa, Illinois, Kansas, Massachusetts, Michigan, Missouri, North Carolina, New Jersey, Rhode Island, South Carolina, and Tennessee. - 3 - Competition WaterStone Bank .
A Wisconsin savings bank that fails to meet this qualified thrift lender test becomes subject to certain operating restrictions otherwise applicable only to commercial banks. At December 31, 2023, WaterStone Bank maintained 88.1% of its assets in qualified thrift investments and therefore met the qualified thrift lender requirement. Federal Law and Regulation .
A Wisconsin savings bank that fails to meet this qualified thrift lender test becomes subject to certain operating restrictions otherwise applicable only to commercial banks. At December 31, 2024, WaterStone Bank maintained 82.3% of its assets in qualified thrift investments and therefore met the qualified thrift lender requirement. Federal Law and Regulation .
Acquisition of more than 10% of any class of a savings and loan holding company’s voting stock constitutes a rebuttable presumption of control under the applicable regulations under certain circumstances including where, as is the case with Waterstone Financial, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.
Under the Change in Bank Control Act’s implementing regulations, acquisition of more than 10% of any class of a savings and loan holding company’s voting stock constitutes a rebuttable presumption of control under certain circumstances including where, as is the case with Waterstone Financial, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.
A total of 182 are WaterStone Bank employees and 516 are employees of Waterstone Mortgage Corporation. We believe we are able to attract and retain top talent by creating a culture that challenges and engages our employees, offering them opportunities to learn, grow and achieve their career goals.
A total of 173 were WaterStone Bank employees and 427 were employees of Waterstone Mortgage Corporation. We believe we are able to attract and retain top talent by creating a culture that challenges and engages our employees, offering them opportunities to learn, grow and achieve their career goals.
Prompt Corrective Regulatory Action Federal bank regulatory authorities are required to take "prompt corrective action" with respect to institutions that do not meet minimum capital requirements. For these purposes, the statute establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.
Prompt Corrective Regulatory Action Federal bank regulatory authorities are required to take "prompt corrective action" with respect to institutions that do not meet minimum capital requirements. For these purposes, Federal Deposit Insurance Act establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.
Higher than anticipated rates of loan default would likely result in a need to increase provisions in future years. At December 31, 2023, the allowance for credit losses - loans was $18.5 million, compared to $17.8 million at December 31, 2022.
Higher than anticipated rates of loan default would likely result in a need to increase provisions in future years. At December 31, 2024, the allowance for credit losses - loans was $18.2 million, compared to $18.5 million at December 31, 2023.
Mortgage-backed securities, collateralized mortgage obligations, and private-label mortgage-backed securities generally yield less than the loans that underlie such securities because of the cost of payment guarantees, if any, and credit enhancements. These fixed-rate securities are usually more liquid than individual mortgage loans. At December 31, 2023, mortgage-backed securities totaled $11.2 million.
Mortgage-backed securities, collateralized mortgage obligations, and private-label mortgage-backed securities generally yield less than the loans that underlie such securities because of the cost of payment guarantees, if any, and credit enhancements. These fixed-rate securities are usually more liquid than individual mortgage loans. At December 31, 2024, mortgage-backed securities totaled $9.6 million.
Management believes it has established an adequate allowance for probable loan losses as appropriate under generally accepted accounting principles. Real Estate Owned. Total real estate owned was $254,000 at December 31, 2023, and $145,000 at December 31, 2022. During the year ended December 31, 2023 and December 31, 2022, there was no significant activity.
Management believes it has established an adequate allowance for probable loan losses as appropriate under generally accepted accounting principles. Real Estate Owned. Total real estate owned was $505,000 at December 31, 2024, and $254,000 at December 31, 2023. During the years ended December 31, 2024 and December 31, 2023, there was no significant activity.
Of the $135,000 in net charge-offs during the year ended December 31, 2023, the majority of the activity related to loans secured by one-to four-family loan categories. Our underwriting policies and procedures emphasize that credit decisions must rely on both the credit quality of the borrower and the estimated value of the underlying collateral.
Of the $40,000 in net recoveries during the year ended December 31, 2024, the majority of the activity related to loans secured by one-to four-family loan categories. Our underwriting policies and procedures emphasize that credit decisions must rely on both the credit quality of the borrower and the estimated value of the underlying collateral.
The increase in loans past due 90 days or more was primarily due to an increase in one-to four-family loans receivable during the year ended December 31, 2023. - 11 - Potential Problem Loans. We define potential problem loans as substandard loans which are still accruing interest.
The decrease in loans past due 90 days or more was primarily due to a decrease in one-to four-family loans receivable during the year ended December 31, 2024. - 11 - Potential Problem Loans. We define potential problem loans as substandard loans which are still accruing interest.
At December 31, 2023, private-label mortgage-backed securities totaled $7.3 million. These securities had a weighted average yield of 3.71% and a weighted average remaining life of 6.6 years at December 31, 2023. The estimated fair value of our private-label mortgage-backed securities portfolio at December 31, 2023 was $801,000 less than the amortized cost of $8.1 million.
At December 31, 2024, private-label mortgage-backed securities totaled $6.4 million. These securities had a weighted average yield of 3.40% and a weighted average remaining life of 8.7 years at December 31, 2024. The estimated fair value of our private-label mortgage-backed securities portfolio at December 31, 2024 was $722,000 less than the amortized cost of $7.1 million.
We also require borrowers with rental investment property to provide an annual report of income and expenses for the property, including a tenant list and copies of leases, as applicable. The average outstanding multi-family mortgage loan balance was approximately $1.5 million on December 31, 2023, with the largest outstanding balance at $16.7 million.
We also require borrowers with rental investment property to provide an annual report of income and expenses for the property, including a tenant list and copies of leases, as applicable. The average outstanding multi-family mortgage loan balance was approximately $1.6 million on December 31, 2024, with the largest outstanding balance at $13.9 million.
It makes advances to members in accordance with policies and procedures established by the Federal Housing Finance Agency and the board of directors of the Federal Home Loan Bank of Chicago. At December 31, 2023, WaterStone Bank had $464.0 million in advances from the Federal Home Loan Bank of Chicago.
It makes advances to members in accordance with policies and procedures established by the Federal Housing Finance Agency and the board of directors of the Federal Home Loan Bank of Chicago. At December 31, 2024, WaterStone Bank had $443.6 million in advances from the Federal Home Loan Bank of Chicago.
Government to manage federal debt limits or remain open; • significant increases in our loan losses; • changes in the financial condition, results of operations or future prospects of issuers of securities that we own; • changes in our liquidity needs and access to wholesale funding; and • our ability to access low-cost funding. - 1 - See also the factors regarding future operations discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" below.
Government to manage federal debt limits; • the imposition of tariffs or other domestic or international governmental policies; • significant increases in our loan losses; • changes in the financial condition, results of operations or future prospects of issuers of securities that we own; • changes in our liquidity needs and access to wholesale funding; and • our ability to access low-cost funding. - 1 - See also the factors regarding future operations discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" below.
WaterStone Bank is a member of the Deposit Insurance Fund, which is administered by the Federal Deposit Insurance Corporation. WaterStone Bank’s deposit accounts are insured by the Federal Deposit Insurance Corporation, generally up to a maximum of $250,000 per depositor per account ownership category. The Federal Deposit Insurance Corporation imposes an assessment against all insured depository institutions.
WaterStone Bank’s deposit accounts are insured by the Federal Deposit Insurance Corporation, generally up to a maximum of $250,000 per depositor per account ownership category. The Federal Deposit Insurance Corporation imposes an assessment against all insured depository institutions.
Loans originated for the purchase of a residential property, which generally yield a higher margin than loans originated for refinancing existing loans, comprised 96.0% of total originations during the year ended December 31, 2023, compared to 89.1% of total originations during the year ended December 31, 2022.
Loans originated for the purchase of a residential property, which generally yield a higher margin than loans originated for refinancing existing loans, comprised 88.9% of total originations during the year ended December 31, 2024, compared to 96.0% of total originations during the year ended December 31, 2023.
We owned three properties at December 31, 2023 and one property at December 31, 2022. Habitable real estate owned is managed with the intent of attracting a lessee to generate revenue.
We owned two properties at December 31, 2024 and three properties at December 31, 2023. Habitable real estate owned is managed with the intent of attracting a lessee to generate revenue.
Commercial real estate loans totaled $300.9 million at December 31, 2023, or 18.1% of total loans, and are made up of loans secured by office and retail buildings, industrial buildings, churches, restaurants, other retail properties and mixed use properties. These loans are generally secured by property located in our primary market area.
Commercial real estate loans totaled $313.5 million at December 31, 2024, or 18.7% of total loans, and are made up of loans secured by office and retail buildings, industrial buildings, churches, restaurants, other retail properties and mixed use properties. These loans are generally secured by property located in our primary market area.
In reaching a decision whether to make a multi-family real estate loan, we consider gross revenues and the net operating income of the property, the borrower’s expertise and credit history, global cash flows, and the appraised value of the underlying property. We will also consider the terms and conditions of the leases and the credit quality of the tenants.
In reaching a decision whether to make a multi-family real estate loan, we consider gross revenues and the net operating income of the property, the borrower’s expertise and credit history, global cash flows, and the appraised value of the underlying property.
WaterStone Bank’s principal lending activity is originating one- to four-family, multi-family residential, and commercial real estate loans for retention in its portfolio. At December 31, 2023, such loans comprised 33.12%, 42.53%, and 18.08%, respectively, of WaterStone Bank’s loan portfolio. WaterStone Bank also offers home equity loans and lines of credit, construction and land loans, commercial business loans, and consumer loans.
WaterStone Bank’s principal lending activity is originating one- to four-family, multi-family residential, and commercial real estate loans for retention in its portfolio. At December 31, 2024, such loans comprised 30.71%, 44.12%, and 18.65%, respectively, of WaterStone Bank’s loan portfolio. WaterStone Bank also offers home equity loans and lines of credit, construction and land loans, commercial business loans, and consumer loans.
At or for the Year Ended December 31, 2023 2022 2021 (Dollars in Thousands) Balance at beginning of period $ 17,757 $ 15,778 $ 18,823 Adoption of CECL (1) - 430 - Provision (credit) for credit losses - loans 927 1,030 (3,990 ) Charge-offs: Mortgage One- to four-family 168 304 151 Multi family - - - Home Equity - - - Commercial real estate - - 13 Construction and land - - 10 Consumer 37 16 18 Commercial - - - Total charge-offs 205 320 192 Recoveries: Mortgage One- to four-family 52 78 949 Multi family 8 727 116 Home Equity 4 18 16 Commercial real estate 3 3 52 Construction and land 3 13 4 Consumer - - - Commercial - - - Total recoveries 70 839 1,137 Net charge-offs (recoveries) 135 (519 ) (945 ) Allowance at end of period $ 18,549 $ 17,757 $ 15,778 Ratios: Allowance for credit losses to non-accrual loans at end of period (1) 385.79 % 412.28 % 283.06 % Allowance for credit losses to loans receivable at end of period (1) 1.11 % 1.18 % 1.31 % Net charge-offs (recoveries) to average loans: Mortgage One- to four-family 0.02 % 0.06 % (0.05 %) Multi family (0.00 %) (0.12 %) (0.01 %) Home Equity (0.03 %) (0.16 %) (0.03 %) Construction and land (0.01 %) 0.00 % (0.01 %) Commercial real estate 0.00 % (0.01 %) 0.00 % Consumer 4.56 % 2.12 % 0.61 % Commercial 0.00 % 0.00 % 0.00 % Net charge-offs (recoveries) to average loans outstanding 0.01 % (0.04 %) (0.07 %) (1) The Company adopted ASU 2016-13 as of January 1, 2022.
At or for the Year Ended December 31, 2024 2023 2022 (Dollars in Thousands) Balance at beginning of period $ 18,549 $ 17,757 $ 15,778 Adoption of CECL (1) - - 430 Provision (credit) for credit losses - loans (342 ) 927 1,030 Charge-offs: Mortgage One- to four-family 3 168 304 Multi family - - - Home Equity - - - Commercial real estate 1 - - Construction and land - - - Consumer 84 37 16 Commercial - - - Total charge-offs 88 205 320 Recoveries: Mortgage One- to four-family 111 52 78 Multi family 10 8 727 Home Equity - 4 18 Commercial real estate 4 3 13 Construction and land 3 3 3 Consumer - - - Commercial - - - Total recoveries 128 70 839 Net charge-offs (recoveries) (40 ) 135 (519 ) Allowance at end of period $ 18,247 $ 18,549 $ 17,757 Ratios: Allowance for credit losses to non-accrual loans at end of period 322.10 % 385.79 % 412.28 % Allowance for credit losses to loans receivable at end of period 1.09 % 1.11 % 1.18 % Net charge-offs (recoveries) to average loans: Mortgage One- to four-family (0.02 %) 0.02 % 0.06 % Multi family (0.00 %) (0.00 %) (0.12 %) Home Equity 0.00 % (0.03 %) (0.16 %) Construction and land (0.01 %) (0.01 %) 0.00 % Commercial real estate 0.00 % 0.00 % (0.01 %) Consumer 10.04 % 4.56 % 2.12 % Commercial 0.00 % 0.00 % 0.00 % Net charge-offs (recoveries) to average loans outstanding (0.00 %) 0.01 % (0.04 %) (1) The Company adopted ASU 2016-13 as of January 1, 2022.
The remaining $2.3 million of non-accrual loans were reviewed on an aggregate basis as of December 31, 2023. The outstanding principal balance of our five largest non-accrual loans as of December 31, 2023 totaled $2.4 million, which represents 49.6% of total non-accrual loans as of that date.
The remaining $2.2 million of non-accrual loans were reviewed on an aggregate basis as of December 31, 2024. The outstanding principal balance of our five largest non-accrual loans as of December 31, 2024 totaled $2.6 million, which represents 45.9% of total non-accrual loans as of that date.
Loans past due less than 90 days increased by $4.2 million during the year ended December 31, 2023. The increase was primarily due to an increase in delinquent one- to four-family loans during the year ended December 31, 2023. Loans past due 90 days or more increased $750,000.
Loans past due less than 90 days increased by $4.3 million during the year ended December 31, 2024. The increase was primarily due to an increase in delinquent one- to four-family loans during the year ended December 31, 2024. Loans past due 90 days or more decreased $448,000.
At December 31, 2023, collateralized mortgage obligations totaled $133.5 million. At December 31, 2023, the collateralized mortgage obligations portfolio consisted entirely of securities backed by government sponsored enterprises or U.S. Government agencies. The collateralized mortgage obligations portfolio had a weighted average yield of 2.48% and a weighted average remaining life of 6.2 years at December 31, 2023.
At December 31, 2024, collateralized mortgage obligations totaled $131.7 million. At December 31, 2024, the collateralized mortgage obligations portfolio consisted entirely of securities backed by government sponsored enterprises or U.S. Government agencies. The collateralized mortgage obligations portfolio had a weighted average yield of 2.70% and a weighted average remaining life of 5.7 years at December 31, 2024.
The ratio of non-accrual loans to total loans receivable was 0.29% at December 31, 2023 compared to 0.29% at December 31, 2022. During the year ended December 31, 2023, $226,000 of loans were transferred to real estate owned, no loans were charged off, $1.6 million in principal payments were received and $854,000 in loans were returned to accrual status.
The ratio of non-accrual loans to total loans receivable was 0.34% at December 31, 2024 compared to 0.29% at December 31, 2023. During the year ended December 31, 2024, $370,000 of loans were transferred to real estate owned, no loans were charged off, $1.3 million in principal payments were received and $842,000 in loans were returned to accrual status.
The borrower represented a total of 2.6% of the total loan portfolio as of December 31, 2023. Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio in dollar amounts and as a percentage of the total portfolio at the dates indicated.
The borrower represented a total of 3.0% of the total loan portfolio as of December 31, 2024. Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio in dollar amounts and as a percentage of the total portfolio at the dates indicated.
The average commercial real estate loan in our portfolio at December 31, 2023 was approximately $1.1 million, and the largest outstanding balance at that date was $16.7 million. Commercial Loans. Commercial loans totaled $37.1 million at December 31, 2023, or 2.2% of total loans, and are made up of loans secured by accounts receivable, inventory, equipment and real estate.
The average commercial real estate loan in our portfolio at December 31, 2024 was approximately $1.1 million, and the largest outstanding balance at that date was $11.6 million. Commercial Loans. Commercial loans totaled $34.1 million at December 31, 2024, or 2.0% of total loans, and are made up of loans secured by accounts receivable, inventory, equipment and real estate.
Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate. As of December 31, 2023, certificates of deposit comprised 61.3% of total customer deposits, and had a weighted average cost of 3.02% on that date.
Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate. As of December 31, 2024, certificates of deposit comprised 66.6% of total customer deposits, and had a weighted average cost of 4.42% on that date.
At and for the Year Ended December 31, 2023 2022 2021 (Dollars in Thousands) Balance at beginning of period $ 4,307 $ 5,574 $ 5,560 Additions 3,209 3,306 3,374 Transfers to real estate owned (226 ) - - Charge-offs - - (12 ) Returned to accrual status (854 ) (1,394 ) (1,792 ) Principal paydowns and other (1,628 ) (3,179 ) (1,556 ) Balance at end of period $ 4,808 $ 4,307 $ 5,574 - 9 - Total non-accrual loans increased by $501,000 to $4.8 million as of December 31, 2023 compared to $4.3 million as of December 31, 2022.
At and for the Year Ended December 31, 2024 2023 2022 (Dollars in Thousands) Balance at beginning of period $ 4,808 $ 4,307 $ 5,574 Additions 3,403 3,209 3,306 Transfers to real estate owned (370 ) (226 ) - Charge-offs - - - Returned to accrual status (842 ) (854 ) (1,394 ) Principal paydowns and other (1,334 ) (1,628 ) (3,179 ) Balance at end of period $ 5,665 $ 4,808 $ 4,307 - 9 - Total non-accrual loans increased by $857,000 to $5.7 million as of December 31, 2024 compared to $4.8 million as of December 31, 2023.
In addition, we must comply with significant anti-money laundering and anti-terrorist financing laws and regulations, Community Reinvestment Act laws and regulations, and fair lending laws and regulations.
In addition, we must comply with significant anti-money laundering and countering the financing of terrorism laws and regulations, Community Reinvestment Act laws and regulations, and fair lending laws and regulations.
However, effective March 26, 2020, the Federal Reserve Board reduced reserve requirement ratios to zero, thereby effectively eliminating the requirements.
However, in 2020, the Federal Reserve Board reduced reserve requirement ratios to zero, thereby effectively eliminating the requirements.
One- to four-family residential mortgage loans totaled $551.2 million, or 33.1% of total loans at December 31, 2023. Our one- to four-family residential mortgage loans have fixed or adjustable rates. Our single family adjustable-rate mortgage loans generally provide for maximum annual rate adjustments of 200 basis points, with a lifetime maximum adjustment of 600 basis points.
One- to four-family residential mortgage loans totaled $516.1 million, or 30.7% of total loans at December 31, 2024. Our one- to four-family residential mortgage loans have fixed or adjustable rates. Our single family adjustable-rate mortgage loans generally provide for maximum annual rate adjustments of 200 basis points, with a lifetime maximum adjustment of 500 basis points.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations. Strong competition within our market areas may limit our growth and profitability. Competition in the banking and financial services industry is intense.
Biggest changeThe removal of banking with financial transactions could result in the loss of customer loans, customer deposits, and the related fee income generated from those loans and deposits. The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.
Competitive factors driven by consumer sentiment or otherwise can also reduce our ability to generate fee income, such as through overdraft fees. Risks Related to Mortgage Banking Operations Secondary mortgage market conditions could have a material impact on our financial condition and results of operations. Our mortgage banking operations provide a significant portion of our non-interest income.
Competitive factors driven by consumer sentiment or otherwise can also reduce our ability to generate fee income, such as through overdraft fees. - 33 - Risks Related to Mortgage Banking Operations Secondary mortgage market conditions could have a material impact on our financial condition and results of operations. Our mortgage banking operations provide a significant portion of our non-interest income.
Our directors do not have significant experience in cybersecurity risk management in other business entities comparable to the Bank and rely on the President and Chief Information Officer for cybersecurity guidance. Our funding sources may prove insufficient to replace deposits at maturity and support our future growth.
Our directors do not have significant experience in cybersecurity risk management in other business entities comparable to the Bank and rely on the President and Chief Information Officer for cybersecurity guidance. - 32 - Our funding sources may prove insufficient to replace deposits at maturity and support our future growth.
Accordingly, we could suffer losses as a result of our failure to properly anticipate and manage these risks. - 32 - Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.
Accordingly, we could suffer losses as a result of our failure to properly anticipate and manage these risks. Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.
However, the rates we earn on our loans did not increase as rapidly during the year ended December 31, 2023, 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.
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.
During the year ended December 31, 2023, we incurred other comprehensive gains of $1.7 million, net of tax expense, related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio. Increases in interest rates can also have an adverse impact on our results of operations, as has happened in recent periods.
During the year ended December 31, 2024, we incurred other comprehensive losses of $994,000, net of tax benefit, related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio. Increases in interest rates can also have an adverse impact on our results of operations, as has happened in recent periods.
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. We had mortgage banking income decrease of $23.9 million during the year ended December 31, 2023.
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 and our customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. We and our customers may face cost increases, asset value reductions, operating process changes and other issues.
Consumers and businesses also may change their behavior on their own as a result of these concerns. We and our customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. We and our customers may face cost increases, asset value reductions, operating process changes and other issues.
Generally, the value of securities moves inversely with changes in interest rates. At December 31, 2023, the fair value of our investment portfolio totaled $204.9 million. Net unrealized losses on these securities totaled $22.8 million at December 31, 2022.
Generally, the value of securities moves inversely with changes in interest rates. At December 31, 2024, the fair value of our investment portfolio totaled $208.5 million. Net unrealized losses on these securities totaled $24.1 million at December 31, 2024.
In our market areas, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, money market funds, insurance companies, and brokerage firms operating locally and elsewhere.
Strong competition within our market areas may limit our growth and profitability. Competition in the banking and financial services industry is intense. In our market areas, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, money market funds, insurance companies, and brokerage firms operating locally and elsewhere.
The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset. We are subject to environmental liability risk associated with lending activities.
The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.
Decreases in interest rates often result in increased prepayments of loans and mortgage-related securities, as borrowers refinance their loans to reduce borrowings costs.
Changes in market interest rates could have an adverse effect on our financial condition and results of operations. Decreases in interest rates often result in increased prepayments of loans and mortgage-related securities, as borrowers refinance their loans to reduce borrowings costs.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve Board. Changes in market interest rates could have an adverse effect on our financial condition and results of operations.
Our earnings and cash flows are dependent on our net interest income and income from our mortgage banking operations. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve Board.
We may be required to repurchase mortgage loans that we have sold in cases of borrower default or breaches of these representations and warranties.
We may be required to repurchase mortgage loans that we have sold in cases of borrower default or breaches of these representations and warranties. If we are required to repurchase mortgage loans or provide indemnification or other recourse, this could increase our costs and thereby affect our future earnings.
Thus, any borrowing or funds needed to raise capital required to make a capital injection becomes more difficult and expensive and could have an adverse effect on our business, financial condition and results of operations. Risks Related to Interest Rates The reversal of the historically low interest rate environment may adversely affect our net interest income and profitability.
Thus, any borrowing or funds needed to raise capital required to make a capital injection becomes more difficult and expensive and could have an adverse effect on our business, financial condition and results of operations. We may become subject to enforcement actions even though non-compliance was inadvertent or unintentional.
Consumers can now easily access historically banking needs through online banking accounts, brokerage accounts, mutual funds or general-purpose reloadable prepaid cards. Consumers can also complete certain transactions without the assistance of banks. The removal of banking with financial transactions could result in the loss of customer loans, customer deposits, and the related fee income generated from those loans and deposits.
Technology is allowing parties to complete financial transactions through alternative methods that historically have involved banks. Consumers can now easily access historically banking needs through online banking accounts, brokerage accounts, mutual funds or general-purpose reloadable prepaid cards. Consumers can also complete certain transactions without the assistance of banks.
Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts. Consumers and businesses also may change their behavior on their own as a result of these concerns.
Risks Related to Environmental and Other Global Matters Societal responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers. Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts.
Removed
The Federal Reserve Board decreased benchmark interest rates to near zero in response to the COVID-19 pandemic. The Federal Reserve Board has reversed its policy of near zero interest rates given its concerns over inflation. Market interest rates have risen significantly in response to the Federal Reserve Board’s recent rate increases.
Added
The financial services industry is subject to intense scrutiny from bank supervisors in the examination process and aggressive enforcement of federal and state regulations, particularly with respect to mortgage-related practices and other consumer compliance matters, and compliance with anti-money laundering, Bank Secrecy Act and Office of Foreign Assets Control regulations, and economic sanctions against certain foreign countries and nationals.
Removed
As discussed below, the increase in market interest rates has already had and is expected to further have an adverse effect on our net interest income and profitability. Changing interest rates may have a negative effect on our results of operations. Our earnings and cash flows are dependent on our net interest income and income from our mortgage banking operations.
Added
Enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices.
Removed
Sustained higher interest rates by the Federal Reserve Board to tame persistent inflationary price pressures could also push down asset prices and weaken economic activity.
Added
We maintain systems and procedures designed to ensure that we comply with applicable laws and regulations; however, some legal/regulatory frameworks provide for the imposition of fines or penalties for non-compliance even though the non-compliance was inadvertent or unintentional and even though there was in place at the time systems and procedures designed to ensure compliance.
Removed
Our stock price may be negatively impacted by unrelated bank failures and negative depositor confidence in depository institutions.
Added
Failure to comply with these and other regulations, and supervisory expectations related thereto, may result in fines, penalties, lawsuits, regulatory sanctions, reputation damage, or restrictions on our business. Risks Related to Interest Rates Changing interest rates may have a negative effect on our results of operations.
Removed
Further, if we are unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, which have come under greater scrutiny in light of recent bank failures, it may have a material adverse effect on our financial condition and results of operations.
Added
Uncertainties associated with increased originations of commercial business loans, as well as continued originations of commercial real estate and multi-family residential real estate loans may result in errors in judging collectability, which may lead to additional provisions for credit losses or charge-offs, which would negatively affect our operations.
Removed
In this case, our operating margins and profitability would be adversely affected. Risks Related to Competitive Matters Consumers may decide to use alternative options to complete financial transactions. Technology is allowing parties to complete financial transactions through alternative methods that historically have involved banks.
Added
Our recent and intended increases in the level of our commercial lending (including commercial business loans, commercial real estate loans and multi-family residential real estate loans) have required and would likely require us to lend to borrowers with which we have limited or no experience.
Removed
If we are required to repurchase mortgage loans or provide indemnification or other recourse, this could increase our costs and thereby affect our future earnings. - 33 - Risks Related to Environmental and Other Global Matters Societal responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers.
Added
Recently originated loans are unseasoned and we do not have a significant payment history pattern with which to judge future collectability. Further, newly originated loans have not been subjected to unfavorable economic conditions. As a result, it may be difficult to predict the future performance of newly originated loans.
Added
These loans may have delinquency or charge-off levels above our recent historical experience, which could adversely affect our future performance. Further, these types of loans generally have larger balances and involve a greater risk than one-to four-family residential mortgage loans.
Added
Accordingly, if we make any errors in judgment in the collectability of these loans, any resulting charge-offs may be larger on a per loan basis than those incurred historically with our single-family residential mortgage loans. We are subject to environmental liability risk associated with lending activities.
Added
In this case, our operating margins and profitability would be adversely affected. The soundness of other financial institutions could adversely affect us. Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty and other relationships.
Added
We have exposure to many different counterparties, and we routinely execute transactions with counterparties in the financial industry, including brokers and dealers, other commercial banks, investment banks, mutual and hedge funds, and other financial institutions.
Added
As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, could lead to market-wide liquidity problems and losses or defaults by us or by other institutions and organizations. Many of these transactions expose us to credit risk in the event of default of our counterparty or client.
Added
In addition, our credit risk may be exacerbated when the collateral held by us cannot be liquidated or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure due to us. Any such losses could materially and adversely affect our results of operations.
Added
Recently we have held larger levels of certificates of deposit, which has increased our cost of funds and could continue to do so in the future . At December 31, 2024, certificates of deposit comprised 66.6% of our total deposits as compared to 61.3% at December 31, 2023.
Added
Our increased levels of certificates of deposit have resulted in a higher cost of funds than would otherwise be the case if we had a higher percentage of demand deposits and savings deposits.
Added
In addition, if our certificates of deposit do not remain with us, we may be required to access other sources of funds, including loan sales, other types of deposits, FHLB advances and other borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay on our certificates of deposit.
Added
Interruption of our customers ’ supply chains and federal funding could negatively impact their business and operations and impact their ability to repay their loans.
Added
Any material interruption in our customers’ supply chains, such as a material interruption of the resources required to conduct their business, such as those resulting from interruptions in service by third-party providers, trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions, reductions in federal subsidies or grants, social or labor unrest, natural disasters, epidemics or pandemics or political disputes and military conflicts, that cause a material disruption in our customers’ supply chains, could have a negative impact on their business and ability to repay their borrowings with us.
Added
In the event of disruptions in our customers’ supply chains, the labor and materials they rely on in the ordinary course of business may not be available at reasonable rates or at all.
Added
Additionally, changes in distribution of federal funds or freezing of federal funds, including reductions in federal workforce causing unemployment, could have an adverse effect on the ability of consumers and businesses to pay debts and/or affect the demand for loans and deposits.
Added
Changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition, and results of operations.
Added
Tariffs and trade restrictions may cause the prices of our customers' products to increase, which could reduce demand for such products, or reduce our customers' margins, and adversely impact their revenues, financial results, and ability to service debt. This in turn could adversely affect our financial condition and results of operations.
Added
In addition, to the extent changes in the political environment have a negative impact on us or on the markets in which we operate our business, our results of operations and financial condition could be materially and adversely impacted in the future. Risks Related to Competitive Matters Consumers may decide to use alternative options to complete financial transactions.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWaukesha, Wisconsin 53186 West Allis/Greenfield Avenue 10101 West Greenfield Avenue West Allis, Wisconsin 53214 Fox Point/North Shore 8607 North Port Washington Road Fox Point, Wisconsin 53217 Greenfield/Loomis Road 5000 West Loomis Road Greenfield, Wisconsin 53220 West Allis/National Avenue 10296 West National Avenue West Allis, Wisconsin 53227 Oak Creek/Howell Avenue 8780 South Howell Avenue Oak Creek, Wisconsin 53154 Milwaukee/Oklahoma Avenue 6801 West Oklahoma Avenue Milwaukee, Wisconsin 53219 (1) Leased property In addition to our banking offices, as of December 31, 2023, Waterstone Mortgage Corporation had 15 offices in Florida, nine offices in New Mexico, four offices in each of Arizona, Virginia, and Wisconsin, three offices in each of California, Maryland, New Hampshire, Oklahoma, and Texas two offices in each of Delaware, Idaho, Kansas, Minnesota, and South Carolina, and one office in each of Colorado, Connecticut, Iowa, Illinois, Kentucky, Massachusetts, Michigan, Missouri, New Jersey, Rhode Island, and Tennessee.
Biggest changeWaukesha, Wisconsin 53186 West Allis/Greenfield Avenue 10101 West Greenfield Avenue West Allis, Wisconsin 53214 Fox Point/North Shore 8607 North Port Washington Road Fox Point, Wisconsin 53217 Greenfield/Loomis Road 5000 West Loomis Road Greenfield, Wisconsin 53220 West Allis/National Avenue 10296 West National Avenue West Allis, Wisconsin 53227 Oak Creek/Howell Avenue 8780 South Howell Avenue Oak Creek, Wisconsin 53154 Milwaukee/Oklahoma Avenue 6801 West Oklahoma Avenue Milwaukee, Wisconsin 53219 (1) Leased property In addition to our banking offices, as of December 31, 2024, Waterstone Mortgage Corporation had nine offices in Florida, eight offices in New Mexico, six offices each in Virginia and Wisconsin, four offices each in Arizona, Oklahoma, and Texas, three offices in New Hampshire, two offices each in California, Idaho, Maryland, and Minnesota, and one office each in Colorado, Connecticut, Delaware, Iowa, Illinois, Kansas, Massachusetts, Michigan, Missouri, North Carolina, New Jersey, Rhode Island, South Carolina, and Tennessee.
The following table sets forth information with respect to our corporate center and our full-service banking offices as of December 31, 2023. Corporate Center 11200 West Plank Court Wauwatosa, Wisconsin 53226 Wauwatosa 7500 West State Street Wauwatosa, Wisconsin 53213 Brookfield (1) 17495 W Capitol Dr.
The following table sets forth information with respect to our corporate center and our full-service banking offices as of December 31, 2024. Corporate Center 11200 West Plank Court Wauwatosa, Wisconsin 53226 Wauwatosa 7500 West State Street Wauwatosa, Wisconsin 53213 Brookfield (1) 17495 W Capitol Dr.
Item 2. Properties We operate from our corporate center, our 14 full-service banking offices, our drive-through office and 14 automated teller machines, located in Milwaukee, Washington and Waukesha Counties, Wisconsin. The net book value of our premises, land, equipment and leasehold improvements was $20.0 million at December 31, 2023.
Item 2. Properties We operate from our corporate center, our 14 full-service banking offices, our drive-through office and 14 automated teller machines, located in Milwaukee, Washington and Waukesha Counties, Wisconsin. The net book value of our premises, land, equipment and leasehold improvements was $19.4 million at December 31, 2024.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share (b) Total Number of Shares Purchased as Part of Publicly Announced Plans Maximum Number of Shares that May Yet Be Purchased Under the Plan (a) October 1, 2023 - October 31, 2023 283,078 $ 10.56 283,078 1,082,117 November 1, 2023 - November 30, 2023 175,700 11.82 175,700 906,417 December 1, 2023 - December 31, 2023 86,085 13.01 86,085 820,332 Total 544,863 $ 11.36 544,863 820,332 (a) On May 24, 2023, the Board of Directors announced the termination of the then-existing stock repurchase plan and authorized the repurchase of 2,000,000 shares of common stock pursuant to a new share repurchase plan.
Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share (b) Total Number of Shares Purchased as Part of Publicly Announced Plans Maximum Number of Shares that May Yet Be Purchased Under the Plan (a) October 1, 2024 - October 31, 2024 83,800 $ 14.52 83,800 1,767,350 November 1, 2024 - November 30, 2024 11,020 14.94 11,020 1,756,330 December 1, 2024 - December 31, 2024 99,236 14.29 99,236 1,657,094 Total 194,056 $ 14.43 194,056 1,657,094 (a) On April 23, 2024, the Board of Directors authorized the repurchase of an additional 2,000,000 shares of common stock pursuant to a new share repurchase plan.
(b) Includes 1% excise tax for repurchases greater than $1.0 million - 39 - PERFORMANCE GRAPH Set forth below is a line graph comparing the cumulative total shareholder return on Waterstone Financial common stock, based on the market price of the common stock and assuming reinvestment of cash dividends, with the cumulative total return of companies on the SNL Thrift NASDAQ Index and the Russell 2000.
(b) Includes 1% excise tax for repurchases greater than $1.0 million - 39 - PERFORMANCE GRAPH Set forth below is a line graph comparing the cumulative total shareholder return on Waterstone Financial common stock, based on the market price of the common stock and assuming reinvestment of cash dividends, with the cumulative total return of companies on the KBW Nasdaq Bank Index and the Russell 2000.
The graph assumes $100 was invested on December 31, 2018, in Waterstone Financial, Inc. common stock and each of those indices. Waterstone Financial, Inc.
The graph assumes $100 was invested on December 31, 2019, in Waterstone Financial, Inc. common stock and each of those indices. Waterstone Financial, Inc.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchase of Equity Securities Our shares of common stock are traded on the NASDAQ Global Select Market® under the symbol WSBF. The approximate number of shareholders of record of Waterstone common stock as of February 29, 2024 was 1,200.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchase of Equity Securities Our shares of common stock are traded on the NASDAQ Global Select Market® under the symbol WSBF. The approximate number of shareholders of record of Waterstone common stock as of February 21, 2025 was 1,400.
On that same date there were 20,052,831 shares of common stock issued and outstanding. Following are the Company's monthly common stock repurchases during the fourth quarter of 2023.
On that same date there were 19,319,808 shares of common stock issued and outstanding. Following are the Company's monthly common stock repurchases during the fourth quarter of 2024.
Removed
Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Waterstone Financial, Inc. 100.00 120.39 129.11 160.00 134.79 117.13 S&P Composite 1500 Thrifts & Mortgage Finance Index 100.00 136.13 122.09 168.88 132.75 131.57 Russell 2000 Index 100.00 125.53 150.58 172.90 137.56 160.85 Item 6 . [Reserved]
Added
Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/30/24 Waterstone Financial, Inc. 100.00 107.24 132.89 111.96 97.29 96.43 KBW NASDAQ Bank Index 100.00 89.69 124.06 97.52 96.65 132.60 Russell 2000 Index 100.00 119.96 137.74 109.59 128.14 142.93 Item 6 . [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAt or for the Year Ended December 31, 2023 2022 2021 (In Thousands, except per share amounts) Selected Financial Condition Data: Total assets $ 2,213,389 $ 2,031,672 $ 2,215,858 Cash and cash equivalents 36,421 46,642 376,722 Securities available for sale 204,907 196,588 179,016 Loans held for sale 164,993 131,188 312,738 Loans receivable 1,664,215 1,510,178 1,205,785 Allowance for credit losses (1) 18,549 17,757 15,778 Loans receivable, net 1,645,666 1,492,421 1,190,007 Real estate owned, net 254 145 148 Deposits 1,190,624 1,199,012 1,233,386 Borrowings 611,054 386,784 477,127 Total shareholders' equity 344,056 370,486 432,773 Selected Operating Data: Interest income $ 99,208 $ 70,245 $ 69,883 Interest expense 48,993 13,291 14,368 Net interest income 50,215 56,954 55,515 Provision (credit) for credit losses (1) 656 968 (3,990 ) Net interest income after provision for credit losses (1) 49,559 55,986 59,505 Noninterest income 81,185 105,555 203,195 Noninterest expense 119,712 137,062 170,594 Income before income taxes 11,032 24,479 92,106 Provision for income taxes 1,657 4,992 21,315 Net income $ 9,375 $ 19,487 $ 70,791 Per common share: Income per share - basic $ 0.47 $ 0.89 $ 2.98 Income per share - diluted $ 0.46 $ 0.89 $ 2.96 Book value $ 16.94 $ 16.71 $ 17.45 Dividends declared $ 0.70 $ 0.80 $ 1.80 (1) The Company adopted ASU 2016-13 as of January 1, 2022.
Biggest changeAt or for the Year Ended December 31, 2024 2023 2022 (In Thousands, except per share amounts) Selected Financial Condition Data: Total assets $ 2,209,608 $ 2,213,389 $ 2,031,672 Cash and cash equivalents 39,761 36,421 46,642 Securities available for sale 208,549 204,907 196,588 Loans held for sale 135,909 164,993 131,188 Loans receivable 1,680,576 1,664,215 1,510,178 Allowance for credit losses 18,247 18,549 17,757 Loans receivable, net 1,662,329 1,645,666 1,492,421 Real estate owned, net 505 254 145 Deposits 1,359,897 1,190,624 1,199,012 Borrowings 446,519 611,054 386,784 Total shareholders' equity 339,135 344,056 370,486 Selected Operating Data: Interest income $ 113,168 $ 99,208 $ 70,245 Interest expense 67,000 48,993 13,291 Net interest income 46,168 50,215 56,954 Provision (credit) for credit losses (168 ) 656 968 Net interest income after provision for credit losses 46,336 49,559 55,986 Noninterest income 89,302 81,185 105,555 Noninterest expense 111,636 119,712 137,062 Income before income taxes 24,002 11,032 24,479 Provision for income taxes 5,314 1,657 4,992 Net income $ 18,688 $ 9,375 $ 19,487 Per common share: Income per share - basic $ 1.01 $ 0.47 $ 0.89 Income per share - diluted $ 1.01 $ 0.46 $ 0.89 Book value $ 17.53 $ 16.94 $ 16.71 Dividends declared $ 0.60 $ 0.70 $ 0.80 - 44 - At or for the Year Ended December 31, 2024 2023 2022 Selected Financial Ratios and Other Data: Performance Ratios: Return on average assets 0.84 % 0.44 % 0.96 % Return on average equity 5.48 2.62 4.91 Interest rate spread (1) 1.51 1.83 2.76 Net interest margin (2) 2.17 2.46 3.00 Noninterest expense to average assets 5.01 5.56 6.79 Efficiency ratio (3) 82.41 91.11 84.34 Average interest-earing assets to average interest-bearing liabilities 121.54 126.10 134.23 Dividend payout ratio (4) 59.41 148.94 146.07 Capital Ratios: Waterstone Financial, Inc.: Equity to total assets at end of period 15.35 % 15.54 % 18.24 % Average equity to average assets 15.30 16.64 19.66 Total capital to risk-weighted assets 20.90 21.50 24.36 Tier 1 capital to risk-weighted assets 19.81 20.39 23.29 Common equity tier 1 capital to risk-weighted assets 19.81 20.39 23.29 Tier 1 capital to average assets 16.04 16.77 19.45 WaterStone Bank: Total capital to risk-weighted assets 20.29 20.10 21.52 Tier 1 capital to risk-weighted assets 19.21 18.99 20.46 Common equity tier 1 capital to risk-weighted assets 19.21 18.99 20.46 Tier 1 capital to average assets 15.55 15.62 17.08 Asset Quality Ratios: Allowance for credit losses - loans as a percent of total loans 1.09 % 1.11 % 1.18 % Allowance for credit losses - loans as a percent of non-performing loans 322.10 385.79 412.28 Net (recoveries) charge-offs to average outstanding loans during the period (0.00 ) 0.01 (0.04 ) Non-performing loans as a percent of total loans 0.34 0.29 0.29 Non-performing assets as a percent of total assets 0.28 0.23 0.22 Other Data: Number of full-service banking offices 14 14 14 Number of full-time equivalent employees 600 698 742 (1) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.
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.
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.
(2) Non-accrual loans have been included in average loans receivable balance. (3) Includes available for sale securities. (4) 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, 2023, 2022, and 2021.
(2) Non-accrual loans have been included in average loans receivable balance. (3) Includes available for sale securities. (4) 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, 2024, 2023, and 2022.
The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning assets and off-balance sheet items to broad risk categories. At December 31, 2023, Waterstone Financial, Inc. and WaterStone Bank exceeded all regulatory capital requirements and are considered “well capitalized” under regulatory guidelines.
The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning assets and off-balance sheet items to broad risk categories. At December 31, 2024, Waterstone Financial, Inc. and WaterStone Bank exceeded all regulatory capital requirements and are considered “well capitalized” under regulatory guidelines.
During the year ended December 31, 2023, 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.
During the year ended December 31, 2024, 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 detailed discussion in the sections below focuses on the results of operations for the year ended December 31, 2023, compared to the year ended December 2022, and the financial condition as of December 31, 2023 compared to the financial condition as of December 31, 2022. - 40 - As described in the notes to consolidated financial statements, we have two reportable segments: community banking and mortgage banking.
The detailed discussion in the sections below focuses on the results of operations for the year ended December 31, 2024, compared to the year ended December 31, 2023, and the financial condition as of December 31, 2024 compared to the financial condition as of December 31, 2023. - 40 - As described in the notes to consolidated financial statements, we have two reportable segments: community banking and mortgage banking.
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 year ended December 31, 2023, compared the year ended December 31, 2022, which focuses on noninterest income and noninterest expenses.
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 year ended December 31, 2024, compared the year ended December 31, 2023, which focuses on noninterest income and noninterest expenses.
Significant Items There were no Significant Items for the years ended December 31, 2023 and 2022. - 41 - Critical Accounting Policies Our consolidated financial statements are prepared in accordance with GAAP and follow general practices within the banking industry.
Significant Items There were no Significant Items for the years ended December 31, 2024 and 2023. - 41 - Critical Accounting Policies Our consolidated financial statements are prepared in accordance with GAAP and follow general practices within the banking industry.
During the year ended December 31, 2023, 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.
During the year ended December 31, 2024, 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.
(2) Includes available for sale securities. (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, 2023, 2022, and 2021.
(2) Includes available for sale securities. (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, 2024, 2023, and 2022.
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).
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).
At December 31, 2023, certificates of deposit scheduled to mature in less than one year totaled $622.4 million. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case.
At December 31, 2024, certificates of deposit scheduled to mature in less than one year totaled $842.4 million. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case.
Other noninterest expense decreased $1.7 million to $3.9 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.
Other noninterest expense decreased $1.3 million to $2.5 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.
At December 31, 2023 and 2022, $36.4 million and $46.6 million, respectively, of our assets were invested in cash and cash equivalents. Our primary sources of cash are principal repayments on loans, proceeds from the calls and maturities of debt and mortgage related securities, increases in deposit accounts, Federal funds purchased and advances from the FHLB.
At December 31, 2024 and 2023, $39.8 million and $36.4 million, respectively, of our assets were invested in cash and cash equivalents. Our primary sources of cash are principal repayments on loans, proceeds from the calls and maturities of debt and mortgage related securities, increases in deposit accounts, Federal funds purchased and advances from the FHLB.
Offsetting the increases in interest income, interest expense on deposits and borrowings increased as replacement rates and average balances increased. There was a provision for credit losses of $441,000 for the year ended December 31, 2023 compared to a provision for credit losses of $677,000 for the year ended December 31, 2022.
Offsetting the increases in interest income, interest expense on deposits and borrowings increased as replacement rates and average balances increased. There was 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.
For a discussion of our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, see “Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” Discussion of Results of Operations included in our 2022 Form 10-K, filed with the SEC on February 28, 2023.
For a discussion of our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, see “Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” Discussion of Results of Operations included in our 2023 Form 10-K, filed with the SEC on March 6, 2024.
The yields on debt securities, federal funds sold and short-term investments before tax-equivalent adjustments were 4.18%, 1.51%, and 0.97% for the years ended December 31, 2023, 2022, and 2021, respectively.
The yields on debt securities, federal funds sold and short-term investments before tax-equivalent adjustments were 4.89%, 4.18%, and 1.51% for the years ended December 31, 2024, 2023, and 2022, respectively.
In addition, the cost of such deposits may be significantly higher if market interest rates are higher or there is an increased amount of competition for deposits in our market area at the time of renewal. Capital Shareholders’ equity decreased by $26.4 million, or 7.1%, to $344.1 million at December 31, 2023 from $370.5 million at December 31, 2022.
In addition, the cost of such deposits may be significantly higher if market interest rates are higher or there is an increased amount of competition for deposits in our market area at the time of renewal. Capital Shareholders’ equity decreased by $4.9 million, or 1.4%, to $339.1 million at December 31, 2024 from $344.1 million at December 31, 2023.
Comparison of Mortgage Banking Segment Operations for the Years Ended December 31, 2023 and 2022 Net loss totaled $9.6 million for the year ended December 31, 2023 compared to net loss of $3.4 million for the year ended December 31, 2022.
Comparison of Mortgage Banking Segment Operations for the Years Ended December 31, 2024 and 2023 Net income totaled $1.4 million for the year ended December 31, 2024 compared to net loss of $9.6 million for the year ended December 31, 2023.
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, increases in the values of securities available for sale, and unearned ESOP shares vesting.
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.
Comparison of Community Banking Segment Operations for the Years Ended December 31, 2023 and 2022 Net income from our community banking segment for the year ended December 31, 2023 totaled $18.6 million compared to $22.8 million for the year ended December 31, 2022.
Comparison of Community Banking Segment Operations for the Years Ended December 31, 2024 and 2023 Net income from our community banking segment for the year ended December 31, 2024 totaled $17.0 million compared to $18.6 million for the year ended December 31, 2023.
Cash received from the principal repayments of debt and mortgage related securities and maturity and calls of debt securities totaled $24.9 million and $50.7 million for the years ended December 31, 2023 and 2022, respectively.
Cash received from the principal repayments of debt and mortgage related securities and maturity and calls of debt securities totaled $30.0 million and $24.9 million for the years ended December 31, 2024 and 2023, respectively.
During the years ended December 31, 2023, and 2022, we originated on a consolidated basis $2.02 billion and $2.55 billion in loans for sale and sold loans on a consolidated basis of $2.06 billion and $2.81 billion.
During the years ended December 31, 2024, and 2023, we originated on a consolidated basis $2.13 billion and $2.02 billion in loans for sale and sold loans on a consolidated basis of $2.24 billion and $2.06 billion.
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 $7.4 million to $52.4 million at December 31, 2023 from $59.8 million at December 31, 2022.
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 million to $48.3 million at December 31, 2024 from $52.4 million at December 31, 2023.
During the years ended December 2023 and 2022, loan originations net of loan repayments resulted in a negative cash flows of $154.2 million and $303.9 million.
During the years ended December 2024 and 2023, loan originations net of loan repayments resulted in a negative cash flows of $16.7 million and $154.2 million.
Results of Operations for the Years Ended December 31, 2023 and 2022 Years Ended December 31, 2023 2022 (Dollars In Thousands, except per share amounts) Net income $ 9,375 $ 19,487 Earnings per share - basic 0.47 0.89 Earnings per share - diluted 0.46 0.89 Return on average assets 0.44 % 0.96 % Return on average equity 2.62 % 4.91 % - 47 - Average Balance Sheets, Interest and Yields/Costs The following table set forth average balance sheets, average yields and costs, and certain other information for the periods indicated.
Results of Operations for the Years Ended December 31, 2024 and 2023 Years Ended December 31, 2024 2023 (Dollars In Thousands, except per share amounts) Net income $ 18,688 $ 9,375 Earnings per share - basic 1.01 0.47 Earnings per share - diluted 1.01 0.46 Return on average assets 0.84 % 0.44 % Return on average equity 5.48 % 2.62 % - 47 - Average Balance Sheets, Interest and Yields/Costs The following table set forth average balance sheets, average yields and costs, and certain other information for the periods indicated.
The decrease in mortgage banking noninterest income was related to a 23.2% decrease in volume and a 2.6% decrease in gross margin on loans originated and sold for the year ended December 31, 2023 compared to December 31, 2022.
The increase in mortgage banking noninterest income was related to a 1.3% increase in volume and a 6.6% increase in gross margin on loans originated and sold for the year ended December 31, 2024 compared to December 31, 2023.
During the year ended December 31, 2023, the Company sold mortgage servicing rights related to $318.4 million in loans serviced for third parties. The sale generated $3.5 million in net proceeds and a $583,000 gain. During the year ended December 31, 2022, there were no sales of mortgage servicing rights.
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.
Shareholders' equity decreased primarily due to the declaration of dividends and the repurchase of stock. 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, increases in the values of securities available for sale, and unearned ESOP shares vesting.
Shareholders' equity decreased primarily due to the the ongoing repurchase of stock, dividends declared, 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.
Securities Available for Sale . Securities available for sale increased by $8.3 million to $204.9 million at December 31, 2023 from $196.6 million at December 31, 2022. The increase was primarily due to purchases of mortgage-related securities to take advantage of the increase in interest rates.
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.
Total loan origination volume on a consolidated basis decreased $525.9 million, or 20.6%, to $2.02 billion during the year ended December 31, 2023 compared to $2.55 billion during the year ended December 31, 2022. Gross margin on loans originated and sold decreased 2.6% at the mortgage banking segment.
Total loan origination volume on a consolidated basis increased $106.3 million, or 5.3%, to $2.13 billion during the year ended December 31, 2024 compared to $2.02 billion during the year ended December 31, 2023. Gross margin on loans originated and sold increased 6.6% at the mortgage banking segment.
We purchased $29.5 million and $90.0 million in debt securities and mortgage related securities classified as available for sale during the years ended December 31, 2023 and 2022, respectively. The net decreases in deposits were $8.4 million and $34.4 for the year ending December 31, 2023 and 2022.
We purchased $34.3 million and $29.5 million in debt securities and mortgage related securities classified as available for sale during the years ended December 31, 2024 and 2023, respectively. The net changes in deposits were a net increase of $169.3 million and a net decrease of $8.4 million for the year ending December 31, 2024 and 2023, respectively.
Additionally, the average balance increased $183.8 million to $532.2 million during the year ended December 31, 2023, compared to $348.5 million during the year ended December 31, 2022. - 49 - Provision for Credit Losses There was a provision for credit losses of $656,000 during the year ended December 31, 2023 compared to a $968,000 provision for loan losses for the year ended December 31, 2022.
Additionally, the average balance increased $40.2 million to $572.5 million during the year ended December 31, 2024, compared to $532.3 million during the year ended December 31, 2023. - 49 - Provision for Credit Losses There was a negative provision for credit losses of $168,000 during the year ended December 31, 2024 compared to a $656,000 provision for loan losses for the year ended December 31, 2023.
The forecast factor remained unchanged as we monitor the economic environment going forward. 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.
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.
Net Interest Income Net interest income decreased $6.7 million, or 11.8%, to $50.2 million during the year ended December 31, 2023 compared to $57.0 million during the year ended December 31, 2022. • Interest income on loans increased $27.2 million, or 43.2%, to $90.1 million during the year ended December 31, 2023 compared to $62.9 million during the year ended December 31, 2022 due primarily to an 85 basis point increase in average yield on loans as interest rates continued to increase over the past year and an increase in average loan balance as loans held for investment increased.
Net Interest Income Net interest income decreased $4.0 million, or 8.1%, to $46.2 million during the year ended December 31, 2024 compared to $50.2 million during the year ended December 31, 2023. • Interest income on loans increased $12.9 million, or 14.3%, to $103.1 million during the year ended December 31, 2024 compared to $90.1 million during the year ended December 31, 2023 due primarily to a 47 basis point increase in average yield on loans as interest rates continued to increase over the past year and an increase in average loan balance as loans held for investment increased.
Offsetting the decreases, the Company sold mortgage servicing rights related to $318.4 million in loans serviced for third parties during the year ended December 31, 2023. The sale generated $3.5 million in net proceeds on a mortgage servicing rights book value of $2.9 million and resulted in a $583,000 gain.
The Company sold mortgage servicing rights related to $233.1 million in loans serviced for third parties. The sale generated $2.1 million in net proceeds on a mortgage servicing rights book value of $2.0 million and resulted in a $152,000 gain during the year ended December 31, 2024.
During the years ended December 31, 2023 and 2022, we repurchased common stock of $26.0 million and $47.8 million, respectively. During the years ended December 31, 2023 and 2022, we paid cash dividends on common stock of $15.4 million and $30.3 million, respectively. Deposits decreased by $8.4 million from December 31, 2022 to December 31, 2023.
During the years ended December 31, 2024 and 2023, we paid cash dividends on common stock of $11.3 million and $15.4 million, respectively. Deposits increased by $169.3 million from December 31, 2023 to December 31, 2024.
We adjust our liquidity levels to fund loan commitments, repay our borrowings, fund deposit outflows and pay real estate taxes on mortgage loans. We also adjust liquidity as appropriate to meet asset and liability management objectives.
The liquidity ratio is equal to average daily cash and cash equivalents for the period divided by average total assets. We adjust our liquidity levels to fund loan commitments, repay our borrowings, fund deposit outflows and pay real estate taxes on mortgage loans. We also adjust liquidity as appropriate to meet asset and liability management objectives.
Years Ended December 31, 2023 2022 2021 Average Balance Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate (Dollars in Thousands) Assets Interest-earning assets: Loans receivable and held for sale (1) $ 1,752,806 90,148 5.14 % $ 1,467,306 62,935 4.29 % $ 1,600,115 64,366 4.02 % Mortgage related securities (2) 172,318 4,053 2.35 % 162,584 3,241 1.99 % 103,324 1,954 1.89 % Debt securities, federal funds sold and short-term investments (2)(3) 119,650 5,201 4.35 % 269,171 4,271 1.59 % 366,949 3,827 1.04 % Total interest-earning assets 2,044,774 99,402 4.86 % 1,899,061 70,447 3.71 % 2,070,388 70,147 3.39 % Noninterest-earning assets 106,532 120,744 142,040 Total assets $ 2,151,306 $ 2,019,805 $ 2,212,428 Liabilities and equity Interest-bearing liabilities: Demand accounts $ 80,143 82 0.10 % 72,751 61 0.08 % 64,653 50 0.08 % Money market and savings accounts 309,119 4,529 1.47 % 391,170 1,201 0.31 % 363,930 904 0.25 % Certificates of deposit 700,034 21,127 3.02 % 602,332 3,601 0.60 % 675,495 3,466 0.51 % Total interest-bearing deposits 1,089,296 25,738 2.36 % 1,066,253 4,863 0.46 % 1,104,078 4,420 0.40 % Borrowings 532,248 23,255 4.37 % 348,482 8,428 2.42 % 479,262 9,948 2.08 % Total interest-bearing liabilities 1,621,544 48,993 3.02 % 1,414,735 13,291 0.94 % 1,583,340 14,368 0.91 % Noninterest-bearing liabilities Non interest-bearing deposits 120,321 159,495 146,767 Other noninterest-bearing liabilities 51,439 48,500 50,140 Total noninterest-bearing liabilities 171,760 207,995 196,907 Total liabilities 1,793,304 1,622,730 1,780,247 Equity 358,002 397,075 432,181 Total liabilities and equity $ 2,151,306 $ 2,019,805 $ 2,212,428 Net interest income / Net interest rate spread (4) 50,409 1.84 % 57,156 2.77 % 55,779 2.48 % Less: taxable equivalent adjustment 194 0.01 % 202 0.01 % 264 0.01 % Net interest income, as reported 50,215 1.83 % 56,954 2.76 % 55,515 2.47 % Net interest-earning assets (5) $ 423,230 $ 484,326 $ 487,048 Net interest margin (6) 2.46 % 3.00 % 2.68 % Tax equivalent effect 0.01 % 0.01 % 0.01 % Net interest margin on a fully tax equivalent basis 2.47 % 3.01 % 2.69 % Average interest-earning assets to average interest-bearing liabilities 126.10 % 134.23 % 130.76 % (1) Includes net deferred loan fee amortization income of $643,000, $684,000 and $2.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Years Ended December 31, 2024 2023 2022 Average Balance Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate (Dollars in Thousands) Assets Interest-earning assets: Loans receivable and held for sale (1) $ 1,838,761 103,066 5.61 % $ 1,752,806 90,148 5.14 % $ 1,467,306 62,935 4.29 % Mortgage related securities (2) 170,671 4,496 2.63 % 172,318 4,053 2.35 % 162,584 3,241 1.99 % Debt securities, federal funds sold and short-term investments (2)(3) 114,617 5,853 5.11 % 119,650 5,201 4.35 % 269,171 4,271 1.59 % Total interest-earning assets 2,124,049 113,415 5.34 % 2,044,774 99,402 4.86 % 1,899,061 70,447 3.71 % Noninterest-earning assets 103,284 106,532 120,744 Total assets $ 2,227,333 $ 2,151,306 $ 2,019,805 Liabilities and equity Interest-bearing liabilities: Demand accounts $ 90,068 98 0.11 % 80,143 82 0.10 % 72,751 61 0.08 % Money market and savings accounts 296,361 5,654 1.91 % 309,119 4,529 1.47 % 391,170 1,201 0.31 % Certificates of deposit 773,616 34,193 4.42 % 700,034 21,127 3.02 % 602,332 3,601 0.60 % Certificates of deposit - brokered 15,004 628 4.19 % - - 0.00 % - - 0.00 % Total interest-bearing deposits 1,175,049 40,573 3.45 % 1,089,296 25,738 2.36 % 1,066,253 4,863 0.46 % Borrowings 572,539 26,427 4.62 % 532,248 23,255 4.37 % 348,482 8,428 2.42 % Total interest-bearing liabilities 1,747,588 67,000 3.83 % 1,621,544 48,993 3.02 % 1,414,735 13,291 0.94 % Noninterest-bearing liabilities Non interest-bearing deposits 91,288 120,321 159,495 Other noninterest-bearing liabilities 47,680 51,439 48,500 Total noninterest-bearing liabilities 138,968 171,760 207,995 Total liabilities 1,886,556 1,793,304 1,622,730 Equity 340,777 358,002 397,075 Total liabilities and equity $ 2,227,333 $ 2,151,306 $ 2,019,805 Net interest income / Net interest rate spread (4) 46,415 1.51 % 50,409 1.84 % 57,156 2.77 % Less: taxable equivalent adjustment 247 0.01 % 194 0.01 % 202 0.01 % Net interest income, as reported 46,168 1.50 % 50,215 1.83 % 56,954 2.76 % Net interest-earning assets (5) $ 376,461 $ 423,230 $ 484,326 Net interest margin (6) 2.17 % 2.46 % 3.00 % Tax equivalent effect 0.02 % 0.01 % 0.01 % Net interest margin on a fully tax equivalent basis 2.19 % 2.47 % 3.01 % Average interest-earning assets to average interest-bearing liabilities 121.54 % 126.10 % 134.23 % (1) Includes net deferred loan fee amortization income of $663,000, $643,000 and $684,000 for the years ended December 31, 2024, 2023, and 2022, respectively.
Uninsured deposit amounts are estimated based on the portions of customer account balances that exceed the FDIC insurance limits. - 52 - At December 31, 2023, we had outstanding commitments to originate loans receivable of $9.8 million.
The Company had approximately $327.2 million of uninsured deposits for approximately 1,373 customers as of December 31, 2024. Uninsured deposit amounts are estimated based on the portions of customer account balances that exceed the FDIC insurance limits. - 52 - At December 31, 2024, we had outstanding commitments to originate loans receivable of $19.1 million.
Additionally, the average balance of time deposits increased $97.7 million compared to the prior year period. • Interest expense on money market, savings, and escrow accounts increased $3.3 million, or 277.1%, due primarily to a 116 basis point increase in average cost of money market, savings, and escrow accounts as offering rates increased to match the Federal Funds Rate.
The average balance of brokered time deposits was $15.0 million. • Interest expense on money market, savings, and escrow accounts increased $1.1 million, or 24.8%, due primarily to a 44 basis point increase in average cost of money market, savings, and escrow accounts as offering rates increased to match the Federal Funds Rate.
The Company's Board of Directors authorized a 2,000,000 share stock repurchase program in the second quarter of 2023. As of December 31, 2023, the Company had repurchased 15.9 million shares at an average price of $15.04 under previously approved stock repurchase plans. Waterstone Financial, Inc. and WaterStone Bank are subject to various regulatory capital requirements, including a risk-based capital measure.
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, the Company had approximately 1.7 million shares remaining in the plan. Waterstone Financial, Inc. and WaterStone Bank are subject to various regulatory capital requirements, including a risk-based capital measure.
We originated $2.12 billion in mortgage loans held for sale (including sales to the community banking segment) during the year ended December 31, 2023, which represents a decrease of $641.8 million, or 23.2%, from the $2.76 billion originated during the year ended December 31, 2022.
We originated $2.15 billion in mortgage loans held for sale (including sales to the community banking segment) during the year ended December 31, 2024, which represents an increase of $26.6 million, or 1.3%, from the $2.12 billion originated during the year ended December 31, 2023.
Loans receivable held for investment increased $154.0 million, or 10.2%, to $1.66 billion at December 31, 2023 from $1.51 billion at December 31, 2022. The increase in total loans receivable was attributable to increases in each of the one- to four-family, multi-family, commercial, and commercial real estate loan categories. Allowance for Credit Losses.
Loans receivable held for investment increased $16.4 million, or 1.0%, to $1.68 billion at December 31, 2024 from $1.66 billion at December 31, 2023. The increase 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.
The mix of loan type trended towards more governmental loans and less conventional loans, with governmental loans and conventional loans comprising 41.0% and 59.0%, respectively of all loan originations, respectively, during the year ended December 31, 2023, compared to 29.3% and 70.7% of all originations, respectively, during the year ended December 31, 2022.
The mix of loan type trended towards more conventional loans and less government loans, with a mix of 63.8% and 36.2%, respectively of all loan originations, respectively, during the year ended December 31, 2024, compared to 59.0% and 41.0% of all originations, respectively, during the year ended December 31, 2023.
In addition, at December 31, 2023, we had unfunded commitments under construction loans of $76.7 million, unfunded commitments under business lines of credit of $15.4 million and unfunded commitments under home equity lines of credit and standby letters of credit of $12.2 million.
In addition, at December 31, 2024, we had unfunded commitments under construction loans of $72.8 million, unfunded commitments under business lines of credit of $15.1 million and unfunded commitments under home equity lines of credit and standby letters of credit of $11.9 million.
The increase in average loan balance was driven by an increase of a $307.2 million, or 23.7%, in the average balance of loans held for investment offset by a decrease of $21.7 million, or 12.6%, in average loans held for sale. • Interest income from mortgage related securities increased $812,000, or 25.1%, primarily as the average balance increased $9.7 million and the yield increased by 36 basis points. • Interest income from debt securities increased $938,000, or 23.1%, to $5.0 million, due primarily to a 267 basis point increase in yield.
The increase in average loan balance was driven by an increase of a $93.6 million, or 5.9%, in the average balance of loans held for investment. • Interest income from mortgage related securities increased $443,000, or 10.9%, primarily as the yield increased by 28 basis points. • Interest income from debt securities increased $599,000, or 12.0%, to $5.6 million, due primarily to a 71 basis point increase in yield.
Total compensation, payroll taxes and other employee benefits decreased $15.9 million, or 19.6%, to $65.1 million for the year ended December 31, 2023 compared to $81.0 million for the year ended December 31, 2022.
Total compensation, payroll taxes and other employee benefits decreased $3.7 million, or 5.7%, to $61.4 million for the year ended December 31, 2024 compared to $65.1 million for the year ended December 31, 2023.
Years Ended December 31, Years Ended December 31, 2023 versus 2022 2022 versus 2021 Increase (Decrease) due to Increase (Decrease) due to Volume Rate Net Volume Rate Net (In Thousands) Interest and dividend income: Loans receivable and held for sale (1)(2) $ 13,483 $ 13,730 $ 27,213 $ (5,567 ) $ 4,136 $ (1,431 ) Mortgage related securities (3) 202 610 812 1,190 97 1,287 Other interest-earning assets (3)(4) (3,376 ) 4,306 930 (1,204 ) 1,648 444 Total interest-earning assets 10,309 18,646 28,955 (5,581 ) 5,881 300 Interest expense: Demand accounts 6 15 21 11 - 11 Money market and savings accounts (305 ) 3,633 3,328 71 226 297 Certificates of deposit 677 16,849 17,526 (214 ) 349 135 Total interest-bearing deposits 378 20,497 20,875 (132 ) 575 443 Borrowings 5,865 8,962 14,827 (3,790 ) 2,270 (1,520 ) Total interest-bearing liabilities 6,243 29,459 35,702 (3,922 ) 2,845 (1,077 ) Net change in net interest income $ 4,066 $ (10,813 ) $ (6,747 ) $ (1,659 ) $ 3,036 $ 1,377 (1) Includes net deferred loan fee amortization income of $643,000, $684,000 and $2.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Years Ended December 31, Years Ended December 31, 2024 versus 2023 2023 versus 2022 Increase (Decrease) due to Increase (Decrease) due to Volume Rate Net Volume Rate Net (In Thousands) Interest and dividend income: Loans receivable and held for sale (1)(2) $ 4,115 $ 8,803 $ 12,918 $ 13,483 $ 13,730 $ 27,213 Mortgage related securities (3) (39 ) 482 443 202 610 812 Other interest-earning assets (3)(4) (230 ) 816 586 (3,376 ) 4,306 930 Total interest-earning assets 3,846 10,101 13,947 10,309 18,646 28,955 Interest expense: Demand accounts 9 7 16 6 15 21 Money market and savings accounts (180 ) 1,305 1,125 (305 ) 3,633 3,328 Certificates of deposit - retail 2,415 10,651 13,066 677 16,849 17,526 Certificates of deposit - brokered 628 - 628 - - - Total interest-bearing deposits 2,872 11,963 14,835 378 20,497 20,875 Borrowings 1,807 1,365 3,172 5,865 8,962 14,827 Total interest-bearing liabilities 4,679 13,328 18,007 6,243 29,459 35,702 Net change in net interest income $ (833 ) $ (3,227 ) $ (4,060 ) $ 4,066 $ (10,813 ) $ (6,747 ) (1) Includes net deferred loan fee amortization income of $663,000, $643,000 and $684,000 for the years ended December 31, 2024, 2023, and 2022, respectively.
See "Comparison of Mortgage Banking Segment Results of Operations for the Year December 31, 2023 and 2022" above, for additional discussion of the increase in mortgage banking income. • Service charges on loans and deposits decreased primarily due to a decrease in loan prepayment fees and other loan fees. • The decrease in other noninterest income was due primarily to an decrease in mortgage servicing fee income and gain from death benefit decreased as there was a gain recorded on one bank owned life insurance policy during the year ended December 31, 2022 compared to none during the year ended December 31, 2023.
See "Comparison of Mortgage Banking Segment Results of Operations for the Year December 31, 2024 and 2023" above, for additional discussion of the increase in mortgage banking income. • Service charges on loans and deposits increased primarily due to an increase in loan prepayment fees and other loan fees. • The decrease in other noninterest income was due primarily to an decrease in gain on sale of mortgage servicing rights.
Net interest income decreased $4.9 million to $51.7 million for the year ended December 31, 2023 compared to $56.6 million for the year ended December 31, 2022.
Net interest income decreased $3.8 million to $48.0 million for the year ended December 31, 2024 compared to $51.7 million for the year ended December 31, 2023.
This was primarily due to increases at the community banking and mortgage banking segments for continued investments in technology and security. • Professional fees increased $871,000, or 48.0%, to $2.7 million during the year ended December 31, 2023.
This was primarily due to a decrease at the mortgage banking segment in an effort to control costs. • Data processing expense increased $325,000 or 7.0% to $5.0 million during the year ended December 31, 2024 This was primarily due to increases at the community banking segment for continued investments in technology, software, and security. • Professional fees increased $498,000, or 18.5%, to $3.2 million during the year ended December 31, 2024.
The increased yield was partially offset by a decrease of $149.5 million in average balance. • Interest expense on time deposits increased $17.5 million, or 486.7%, primarily due to a 242 basis point increase in average cost of time deposits.
The increased yield was partially offset by a decrease of $5.0 million in average balance. • Interest expense on time deposits increased $13.1 million, or 61.8%, primarily due to a 140 basis point increase in average cost of time deposits. Additionally, the average balance of retail time deposits increased $73.6 million compared to the prior year period.
The increase was also driven by a decrease in unrealized losses as the values of securities increased due to a decrease in long term interest rates. Purchases for the year exceeded the combination of security paydowns and maturities of debt securities. Loans Held for Sale .
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 .
Shareholders’ equity decreased by $26.4 million, or 7.1%, to $344.1 million at December 31, 2023 from $370.5 million at December 31, 2022. Shareholders' equity decreased primarily due to the declaration of dividends and the repurchase of stock.
Shareholders’ equity decreased by $4.9 million, or 1.4%, to $339.1 million at December 31, 2024 from $344.1 million at December 31, 2023. Shareholders' equity decreased primarily due to the the ongoing repurchase of stock, dividends paid, and decrease in the fair value of the securities portfolio.
Partially offsetting the increase in average cost, the average balance decreased $82.1 million as more money moved to time deposits. • Interest expense on borrowings increased $14.8 million, or 175.9%, to $23.3 million due to a 195 basis point increase in the cost of borrowings during the year ended December 31, 2023 compared to the year ended December 31, 2022 as the federal funds rate increased over the past year.
Partially offsetting the increase in average cost, the average balance decreased $12.8 million as more money moved to time deposits. • Interest expense on borrowings increased $3.2 million, or 13.6%, to $26.4 million due to a 25 basis point increase in the cost of borrowings during the year ended December 31, 2024 compared to the year ended December 31, 2023 as we transitioned to more short-term fundings for a majority of the year.
Cash and cash equivalents decreased $10.2 million to $36.4 million at December 31, 2023 from $46.6 million at December 31, 2022. The decrease in cash and cash equivalents primarily reflects the funding of loans held for sale, loans held for investment, and securities available for sale as well as the decrease of funding sources from deposits.
Cash and cash equivalents increased $3.3 million to $39.8 million at December 31, 2024 from $36.4 million at December 31, 2023. The increase in cash and cash equivalents primarily reflects the decrease in funding of loans held for sale and increase in deposit liabilities. Securities Available for Sale .
The percentage of origination volume related to purchase activity increased to 96.0% from 89.1% of total originations for the year ended December 31, 2023 and 2022, respectively, as refinance demand decelerated due to an increase in interest rates over the past year.
The percentage of origination volume related to purchase activity decreased to 88.9% from 96.0% of total originations for the year ended December 31, 2024 and 2023, 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.
(2) Represents net interest income as a percent of average interest-earning assets. (3) Represents noninterest expense divided by the sum of net interest income and noninterest income. (4) Represents dividends paid per share divided by basic earnings per share. (5) The Company adopted ASU 2016-13 as of January 1, 2022.
(2) Represents net interest income as a percent of average interest-earning assets. (3) Represents noninterest expense divided by the sum of net interest income and noninterest income. (4) Represents dividends paid per share divided by basic earnings per share. Comparison of Consolidated Waterstone Financial, Inc. Financial Condition at December 31, 2024 and at December 31, 2023 Total Assets.
Total mortgage banking noninterest income decreased $25.6 million, or 24.6%, to $78.5 million during the year ended December 31, 2023 compared to $104.1 million during the year ended December 31, 2022.
Total mortgage banking noninterest income increased $5.8 million, or 7.4%, to $84.3 million during the year ended December 31, 2024 compared to $78.5 million during the year ended December 31, 2023.
Loans held for sale increased $33.8 million, or 25.8%, to $165.0 million at December 31, 2023 from $131.2 million at December 31, 2022 due to a decrease in mortgage rates at the end of the year. - 45 - Loans Receivable .
Loans held for sale decreased $29.1 million, or 17.6%, to $135.9 million at December 31, 2024 from $165.0 million at December 31, 2023 due to an increase in mortgage rates at the end of the year. - 45 - Loans Receivable .
The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than do the effects of inflation. - 53 -
As a result, changes in market interest rates have a greater impact on performance than do the effects of inflation. - 53 -
The provision for credit losses consisted of a $712,000 provision related to loans due to loan growth and a $271,000 of negative provision related to unfunded commitments as the loan pipeline balance decreased for the year ended December 31, 2023. The provision for credit losses related to loans increased primarily due to loan growth in the portfolio.
The negative provision for credit losses consisted of a $319,000 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 of provision related to unfunded commitments as the loan pipeline balance decreased for the year ended December 31, 2024.
Noninterest Income Years Ended December 31, 2023 2022 $ Change % Change (Dollars in Thousands) Service charges on loans and deposits $ 1,819 $ 2,202 $ (383 ) (17.4 %) Increase in cash surrender value of life insurance 1,710 1,738 (28 ) (1.6 %) Mortgage banking income 75,686 99,560 (23,874 ) (24.0 %) Other 1,970 2,055 (85 ) (4.1 %) Total noninterest income $ 81,185 $ 105,555 $ (24,370 ) (23.1 %) Total noninterest income decreased $24.4 million, or 23.1%, to $81.2 million during the year ended December 31, 2023 compared to $105.6 million during the year ended December 31, 2022. • The decrease in mortgage banking income was primarily the result of a decrease in loan origination volume and gross margin on loans originated and sold.
Noninterest Income Years Ended December 31, 2024 2023 $ Change % Change (Dollars in Thousands) Service charges on loans and deposits $ 2,060 $ 1,819 $ 241 13.2 % Increase in cash surrender value of life insurance 1,969 1,710 259 15.1 % Mortgage banking income 83,565 75,686 7,879 10.4 % Other 1,708 1,970 (262 ) (13.3 %) Total noninterest income $ 89,302 $ 81,185 $ 8,117 10.0 % Total noninterest income increased $8.1 million, or 10.0%, to $89.3 million during the year ended December 31, 2024 compared to $81.2 million during the year ended December 31, 2023. • The increase in mortgage banking income was primarily the result of an increase in loan origination volume and a decrease in noninterest expenses.
See Note 8 - Borrowings of the notes to the consolidated financial statements for additional information about the remaining maturities of our FHLB long-term debt. See Note 14 - Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities of the notes to the consolidated financial statements for additional information.
In addition, we repaid $175.0 million in FHLB long-term debt and took on $170.0 million of new FHLB long-term debt. See Note 8 - Borrowings of the notes to the consolidated financial statements for additional information about the remaining maturities of our FHLB long-term debt.
The increase in the loan portfolio provision is due to the increase in loan balance and the decrease on the unfunded commitments is due to the decrease in the loan pipeline. During the year ended December 31, 2023, we made adjustments to our qualitative factors, primarily to account for the changes in internal metrics and external risk factors.
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, we made adjustments to our qualitative factors, primarily to account for the changes in internal metrics and external risk factors.
Impact of Inflation and Changing Prices The financial statements and accompanying notes have been prepared in accordance with GAAP. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation.
GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature.
See Note 6 - Borrowings of the notes to audited consolidated financial statements for additional information about the remaining call option details of our FHLB long-term debt. The Company had approximately $287.9 million of uninsured deposits for approximately 1,209 customers as of December 31, 2023.
At December 31, 2024, we had $150.0 million in long term advances from the FHLB with contractual maturity dates in 2027 and 2029. See Note 6 - Borrowings of the notes to audited consolidated financial statements for additional information about the remaining call option details of our FHLB long-term debt.
The $656,000 provision for credit losses consisted of a $927,000 provision related to loans and $271,000 of negative provision related to unfunded commitments for the year ended December 31, 2023.
The $168,000 negative provision for credit losses consisted of a $342,000 negative provision related to loans and $174,000 of provision related to unfunded commitments for the year ended December 31, 2024. The decrease in the loan portfolio provision is due to the decrease in historical loss factors and certain qualitative factors.
Income tax expense was recognized during the year ended December 31, 2023 at an effective rate of 15.0% compared to an effective rate of 20.4% during the year ended December 31, 2022.
Income tax expense was recognized during the year ended December 31, 2024 at an effective rate of 22.1% compared to an effective rate of 15.0% during the year ended December 31, 2023. On March 18, 2024, the State of Wisconsin Department of Revenue issued an emergency ruling with additional details of the law.
In addition, we borrowed $145.0 million from the Federal Reserve Bank, all of which was incremental to 2022. External short-term borrowings at the mortgage banking segment increased a total of $1.0 million to $2.1 million at December 31, 2023 from $1.1 million at December 31, 2022.
External short-term borrowings at the mortgage banking segment increased a total of $900,000 to $3.0 million at December 31, 2024 from $2.1 million at December 31, 2023. The overall decrease in borrowings was primarily offset by the increase in deposits. Other Liabilities.
The increase was primarily due to an increase in variable compensation and overall salary expense due to annual raises and an increase in full-time equivalents due to open positions being filled. • Occupancy, office furniture and equipment expense at the mortgage banking segment decreased $410,000 to $4.7 million during the year ended December 31, 2023 primarily resulting from lower equipment lease, maintenance, computer, and depreciation expenses. • Occupancy, office furniture and equipment expense at the community banking segment increased $27,000 to $3.7 million during the year ended December 31, 2023 compared to the prior year.
The increase was primarily due to an increase in health insurance expense as claims increased. • Occupancy, office furniture and equipment expense at the mortgage banking segment decreased $789,000 to $3.9 million during the year ended December 31, 2024 primarily resulting from decreased rent and depreciation expenses and underperforming branches were closed over the past year. • Occupancy, office furniture and equipment expense at the community banking segment increased $40,000 to $3.7 million during the year ended December 31, 2024 compared to the prior year.
Contractual Obligations, Commitments, Contingent Liabilities, and Off-balance Sheet Arrangements During the year ended December 31, 2023, our FHLB short-term debt increased by $123.3 million and we repaid $304.0 million in FHLB long-term debt and borrowed $259.0 million of new FHLB long-term debt. In addition, we borrowed $145.0 in short-term debt from the Federal Reserve Bank.
Contractual Obligations, Commitments, Contingent Liabilities, and Off-balance Sheet Arrangements During the year ended December 31, 2024, our short-term debt decreased $159.5 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.
Additionally, salaries expense decreased due a reduction in headcount during the year ended December 31, 2023 compared to the year ended December 31, 2022. • Compensation, payroll taxes and other employee benefits expense at the community banking segment increased $853,000 or 4.5%, to $19.9 million during the year ended December 31, 2023.
The decrease primarily related to decreased salary expense and incentives expense driven by reduced employee headcount and a decrease in new branches added over the past year. • Compensation, payroll taxes and other employee benefits expense at the community banking segment increased $819,000 or 4.1%, to $20.7 million during the year ended December 31, 2024.
WaterStone Bank has various financial obligations, including contractual obligations and commitments that may require future cash payments. The following tables present information indicating various non-deposit contractual obligations and commitments of WaterStone Bank as of December 31, 2023 and the respective maturity dates.
The following tables present information indicating various non-deposit contractual obligations and commitments of WaterStone Bank as of December 31, 2024 and the respective maturity dates. Impact of Inflation and Changing Prices The financial statements and accompanying notes have been prepared in accordance with GAAP.
The decrease was due primarily to increased building maintenance/repair costs. • Advertising expense decreased $197,000, or 5.0%, to $3.8 million during the year ended December 31, 2023.
The increase was due primarily to increases related to new equipment expenses. • Advertising expense decreased $225,000, or 6.0%, to $3.6 million during the year ended December 31, 2024.
Offsetting the decreases, other noninterest expenses increased at the community banking segment as FDIC premiums increased starting in 2023 - 51 - Income Taxes Income tax expense decreased $3.3 million to $1.7 million during the year ended December 31, 2023, compared to $5.0 million during the year ended December 31, 2022 as pretax income decreased $13.4 million.
The decrease primarily related to decreased provision for branch losses, branch overhead, provision for loan sale losses, and reversal of mortgage servicing rights impairment at the mortgage banking segment. - 51 - Income Taxes Income tax expense increased $3.7 million to $5.3 million during the year ended December 31, 2024, compared to $1.7 million during the year ended December 31, 2023 as pretax income decreased $13.4 million.
As of December 31, 2023 and December 31, 2022, the Company maintained servicing rights related to $238.7 million and $409.6 million, respectively, in loans previously sold to third parties. - 50 - Noninterest Expenses Years Ended December 31, 2023 2022 $ Change % Change (Dollars in Thousands) Compensation, payroll taxes, and other employee benefits $ 84,096 $ 99,565 $ (15,469 ) (15.5 %) Occupancy, office furniture, and equipment 8,323 8,706 (383 ) (4.4 %) Advertising 3,779 3,976 (197 ) (5.0 %) Data processing 4,653 4,470 183 4.1 % Communications 988 1,189 (201 ) (16.9 %) Professional fees 2,686 1,815 871 48.0 % Real estate owned 4 19 (15 ) (78.9 %) Loan processing expense 3,428 4,744 (1,316 ) (27.7 %) Other 11,755 12,578 (823 ) (6.5 %) Total noninterest expenses $ 119,712 $ 137,062 $ (17,350 ) (12.7 %) Total noninterest expenses decreased $17.4 million, or 12.7%, to $119.7 million during the year ended December 31, 2023 compared to $137.1 million during the year ended December 31, 2022. • Compensation, payroll taxes and other employee benefit expense at our mortgage banking segment decreased $15.9 million, or 19.6%, to $65.1 million for the year ended December 31, 2023.
The sale generated $3.5 million in net proceeds and a $583,000 gain. - 50 - Noninterest Expenses Years Ended December 31, 2024 2023 $ Change % Change (Dollars in Thousands) Compensation, payroll taxes, and other employee benefits $ 81,078 $ 84,096 $ (3,018 ) (3.6 %) Occupancy, office furniture, and equipment 7,573 8,323 (750 ) (9.0 %) Advertising 3,554 3,779 (225 ) (6.0 %) Data processing 4,978 4,653 325 7.0 % Communications 922 988 (66 ) (6.7 %) Professional fees 3,184 2,686 498 18.5 % Real estate owned 26 4 22 550.0 % Loan processing expense 3,090 3,428 (338 ) (9.9 %) Other 7,231 11,755 (4,524 ) (38.5 %) Total noninterest expenses $ 111,636 $ 119,712 $ (8,076 ) (6.7 %) Total noninterest expenses decreased $8.1 million, or 6.7%, to $111.6 million during the year ended December 31, 2024 compared to $119.7 million during the year ended December 31, 2023. • Compensation, payroll taxes and other employee benefit expense at our mortgage banking segment decreased $3.7 million, or 5.7%, to $61.4 million for the year ended December 31, 2024.
The decrease was driven by a $96.4 million decrease in total transaction accounts, offset by an $88.0 million increase in time deposits. 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.
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.
The allowance for credit losses increased $792,000 to $18.5 million at December 31, 2023 from $17.8 million at December 31, 2022. The increase primarily resulted from the increase in the total loan balances. Net charge-offs totaled $135,000 for the year ended December 31, 2023.
Allowance for Credit Losses. The allowance for credit losses decreased $302,000 to $18.2 million at December 31, 2024 from $18.5 million at December 31, 2023. The decrease primarily resulted from a decrease in historical loss rates and changed in qualitative factors. Net recoveries totaled $40,000 for the year ended December 31, 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAnalysis of Net Interest Income Sensitivity Immediate Change in Rates +300 +200 +100 -100 (Dollar Amounts in Thousands) As of December 31, 2023 Dollar Change $ (11,128 ) $ (7,467 ) $ (3,775 ) $ 4,304 Percentage Change (27.4 %) (18.4 %) (9.3 %) 10.6 % At December 31, 2023, a 100 basis point instantaneous increase in interest rates had the effect of decreasing forecast net interest income over the next 12 months by 9.3% while a 100 basis point decrease in rates had the effect of increasing net interest income by 10.6%. - 54 -
Biggest changeAnalysis of Net Interest Income Sensitivity Immediate Change in Rates +300 +200 +100 -100 (Dollar Amounts in Thousands) As of December 31, 2024 Dollar Change $ (10,971 ) $ (7,174 ) $ (3,586 ) $ 1,432 Percentage Change (20.8 %) (13.6 %) (6.8 %) 2.7 % At December 31, 2024, a 100 basis point instantaneous increase in interest rates had the effect of decreasing forecast net interest income over the next 12 months by 9.3% while a 100 basis point decrease in rates had the effect of increasing net interest income by 10.6%. - 54 -
At least quarterly we review the potential effect changes in interest rates may have on the repayment or repricing of rate sensitive assets and funding requirements of rate sensitive liabilities. Our most recent simulation uses projected repricing of assets and liabilities at December 31, 2023 on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments.
At least quarterly we review the potential effect changes in interest rates may have on the repayment or repricing of rate sensitive assets and funding requirements of rate sensitive liabilities. Our most recent simulation uses projected repricing of assets and liabilities at December 31, 2024 on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments.

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