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What changed in Waterstone Financial, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Waterstone Financial, Inc.'s 2024 and 2025 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 2025 report.

+278 added−271 removedSource: 10-K (2026-02-26) vs 10-K (2025-02-28)

Top changes in Waterstone Financial, Inc.'s 2025 10-K

278 paragraphs added · 271 removed · 239 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

117 edited+3 added−10 removed250 unchanged
Biggest changeAt 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.
Biggest changeAt or for the Year Ended December 31, 2025 2024 2023 (Dollars in Thousands) Balance at beginning of period $ 18,247 $ 18,549 $ 17,757 Provision (credit) for credit losses - loans (891 ) (342 ) 927 Charge-offs: Mortgage One- to four-family - 3 168 Multi family - - - Home equity - - - Commercial real estate - 1 - Construction and land - - - Consumer 42 84 37 Commercial - - - Total charge-offs 42 88 205 Recoveries: Mortgage One- to four-family 70 111 52 Multi family 8 10 8 Home equity 75 - 4 Commercial real estate - 4 3 Construction and land 3 3 3 Consumer 8 - - Commercial - - - Total recoveries 164 128 70 Net charge-offs (recoveries) (122 ) (40 ) 135 Allowance at end of period $ 17,478 $ 18,247 $ 18,549 Ratios: Allowance for credit losses to non-accrual loans at end of period 283.04 % 322.10 % 385.79 % Allowance for credit losses to loans receivable at end of period 1.04 % 1.09 % 1.11 % Net charge-offs (recoveries) to average loans: Mortgage One- to four-family (0.01 %) (0.02 %) 0.02 % Multi family (0.00 %) (0.00 %) (0.00 %) Home Equity (0.57 %) 0.00 % (0.03 %) Construction and land 0.00 % (0.01 %) (0.01 %) Commercial real estate 0.00 % 0.00 % 0.00 % Consumer 4.18 % 10.04 % 4.56 % Commercial 0.00 % 0.00 % 0.00 % Net charge-offs (recoveries) to average loans outstanding (0.01 %) (0.00 %) 0.01 % The allowance for credit losses - loans decreased $769,000 to $17.5 million at December 31, 2025 from $18.2 million at December 31, 2024.
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.
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).
Under the implementing regulations, a bank is deemed to be (i) "well capitalized" if it has a total risk-based capital ratio of 10.0% or more, a Tier 1 risk-based capital ratio of 8.0% or more, a Tier 1 leverage ratio of 5.0% or more and a common equity Tier 1 capital ratio of 6.5% or more, and is not subject to any written agreement, order or capital directive, 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 capital 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%. - 19 - 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).
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.
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. - 22 - Holding Company Regulation Waterstone Financial is a unitary savings and loan holding company subject to regulation and supervision by the Federal Reserve Board.
Specific reserves have been established to the extent that the collateral-based impairment analyses indicate that a collateral shortfall exists or to the extent that a discounted cash flow analysis results in an impairment. - 10 - Information with respect to the accrual status of our financial receivables whose borrowers are experiencing financial difficulty is provided in the following table.
Specific reserves have been established to the extent that the collateral-based impairment analyses indicate that a collateral shortfall exists or to the extent that a discounted cash flow analysis results in an impairment. Information with respect to the accrual status of our financial receivables whose borrowers are experiencing financial difficulty is provided in the following table.
Our investment securities portfolio is comprised principally of mortgage-backed securities, collateralized mortgage obligations, government-sponsored enterprise bonds, private-label enterprise bonds, municipal obligations, and other debt securities. WaterStone Bank is subject to comprehensive regulation and examination by the Wisconsin Department of Financial Institutions (the "WDFI") and the Federal Deposit Insurance Corporation (the "FDIC").
Our investment securities portfolio is comprised principally of mortgage-backed securities, government-sponsored enterprise bonds, private-label enterprise bonds, municipal obligations, and other debt securities. WaterStone Bank is subject to comprehensive regulation and examination by the Wisconsin Department of Financial Institutions (the "WDFI") and the Federal Deposit Insurance Corporation (the "FDIC").
The real estate lending policies must reflect consideration of the Interagency Guidelines for Real Estate Lending Policies ("Interagency Guidelines") that have been adopted by the federal bank regulators. - 20 - The Interagency Guidelines, among other things, require a depository institution to establish internal loan-to-value limits for real estate loans that are not in excess of the following supervisory limits: ● for loans secured by raw land, the supervisory loan-to-value limit is 65% of the value of the collateral; ● for land development loans (i.e., loans for the purpose of improving unimproved property prior to the erection of structures), the supervisory limit is 75%; ● for loans for the construction of commercial, over four-family or other non-residential property, the supervisory limit is 80%; ● for loans for the construction of one- to four-family properties, the supervisory limit is 85%; and ● for loans secured by other improved property (e.g., farmland, completed commercial property and other income-producing property, including non-owner occupied, one- to four-family property), the limit is 85%.
The real estate lending policies must reflect consideration of the Interagency Guidelines for Real Estate Lending Policies ("Interagency Guidelines") that have been adopted by the federal bank regulators. - 17 - The Interagency Guidelines, among other things, require a depository institution to establish internal loan-to-value limits for real estate loans that are not in excess of the following supervisory limits: ● for loans secured by raw land, the supervisory loan-to-value limit is 65% of the value of the collateral; ● for land development loans (i.e., loans for the purpose of improving unimproved property prior to the erection of structures), the supervisory limit is 75%; ● for loans for the construction of commercial, over four-family or other non-residential property, the supervisory limit is 80%; ● for loans for the construction of one- to four-family properties, the supervisory limit is 85%; and ● for loans secured by other improved property (e.g., farmland, completed commercial property and other income-producing property, including non-owner occupied, one- to four-family property), the limit is 85%.
Loan servicing includes collecting and remitting loan payments, accounting for principal and interest, contacting delinquent mortgagors, supervising foreclosures and property dispositions in the event of unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and generally administering the loans. - 7 - Loan Approval Procedures and Authority .
Loan servicing includes collecting and remitting loan payments, accounting for principal and interest, contacting delinquent mortgagors, supervising foreclosures and property dispositions in the event of unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and generally administering the loans. Loan Approval Procedures and Authority .
Credit quality is assured only when the estimated value of the collateral is objectively determined and is not subject to significant fluctuation. - 14 - The establishment of the amount of the credit loss allowance inherently involves judgments by management as to the appropriateness of the allowance, which ultimately may or may not be correct.
Credit quality is assured only when the estimated value of the collateral is objectively determined and is not subject to significant fluctuation. The establishment of the amount of the credit loss allowance inherently involves judgments by management as to the appropriateness of the allowance, which ultimately may or may not be correct.
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.
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. - 21 - 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.
Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt. - 8 - The table below sets forth the amounts and categories of our non-accrual loans and real estate owned at the dates indicated.
Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt. - 7 - The table below sets forth the amounts and categories of our non-accrual loans and real estate owned at the dates indicated.
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.
At December 31, 2025, 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.
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 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, 2025, WaterStone Bank’s Required Liquidity Ratio was 8.0%.
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.
The composition and maturities of the debt securities portfolio at December 31, 2025 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 dividend rate and continued payment of dividends will depend on a number of factors, including our capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations, and general economic conditions. - 26 - Federal Securities Laws Regulation Securities Exchange Act. Waterstone Financial common stock is registered with the Securities and Exchange Commission.
The dividend rate and continued payment of dividends will depend on a number of factors, including our capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations, and general economic conditions. - 23 - Federal Securities Laws Regulation Securities Exchange Act. Waterstone Financial common stock is registered with the Securities and Exchange Commission.
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.
Based upon these specific reviews, no charge-offs have been recorded over the life of these loans as of December 31, 2025. 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, 2025.
The Federal Reserve Board took that action due to a change in its approach to monetary policy; it has indicated that it currently has no plans to re-impose reserve requirements but could in the future if conditions warrant. - 23 - Transactions with Affiliates and Insiders Wisconsin Law and Regulation .
The Federal Reserve Board took that action due to a change in its approach to monetary policy; it has indicated that it currently has no plans to re-impose reserve requirements but could in the future if conditions warrant. - 20 - Transactions with Affiliates and Insiders Wisconsin Law and Regulation .
Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
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.
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, 2025, outstanding home equity loans and equity lines of credit totaled $13.2 million, or 0.8% of total loans outstanding.
Any future provisions for loan losses will continue to be based upon our assessment of the overall loan portfolio and the underlying collateral, trends in non-performing loans, current economic conditions and other relevant factors. - 13 - Allocation of Allowance for Credit Losses - Loans.
Any future provisions for loan losses will continue to be based upon our assessment of the overall loan portfolio and the underlying collateral, trends in non-performing loans, current economic conditions and other relevant factors. - 11 - Allocation of Allowance for Credit Losses - Loans.
The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on WaterStone Bank, Waterstone Mortgage Corporation and Waterstone Financial. - 19 - Intrastate and Interstate Merger and Branching Activities Wisconsin Law and Regulation.
The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on WaterStone Bank, Waterstone Mortgage Corporation and Waterstone Financial. - 16 - Intrastate and Interstate Merger and Branching Activities Wisconsin Law and Regulation.
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, 2025, 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.
Exclusive of our mortgage banking operations, we retain in our portfolio all of the loans that we originate. At December 31, 2024,WaterStone Bank was not servicing any loan it originated and subsequently sold to unrelated third parties.
Exclusive of our mortgage banking operations, we retain in our portfolio all of the loans that we originate. At December 31, 2025, WaterStone Bank was not servicing any loan it originated and subsequently sold to unrelated third parties.
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.
Acquired in 2006, Waterstone Mortgage Corporation is a mortgage banking business with offices in 24 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.
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.
There were no accruing loans past due 90 days or more during the years ended December 31, 2025 or December 31, 2024. 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.
The fair value is primarily based upon updated appraisals in addition to an analysis of current real estate market conditions. - 12 - Allowance for Credit Losses The following table sets forth activity in our allowance for credit losses - loans for the years indicated.
The fair value is primarily based upon updated appraisals in addition to an analysis of current real estate market conditions. - 10 - Allowance for Credit Losses The following table sets forth activity in our allowance for credit losses - loans for the years indicated.
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.
These five loans did not have any charge-offs or require any specific valuation allowances as of December 31, 2025. - 8 - 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 following table summarizes the final maturities of our loan portfolio at December 31, 2024. Maturities are based upon the final contractual payment dates and do not reflect the impact of prepayments and scheduled monthly payments that will occur.
The following table summarizes the final maturities of our loan portfolio at December 31, 2025. Maturities are based upon the final contractual payment dates and do not reflect the impact of prepayments and scheduled monthly payments that will occur.
Foreclosed properties are transferred to real estate owned at estimated net realizable value (which includes costs to sell the property), with charge-offs, if any, charged to the allowance for loan losses upon transfer to real estate owned.
Foreclosed properties are transferred to real estate owned at estimated net realizable value (which includes costs to sell the property), with charge-offs, if any, charged to the allowance for credit losses upon transfer to real estate owned.
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 borrower represented a total of 3.0% of the total loan portfolio as of December 31, 2025. 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 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.
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, 2025 and 2024.
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.
We owned three properties at December 31, 2025 and two properties at December 31, 2024. Habitable real estate owned is managed with the intent of attracting a lessee to generate revenue.
The average outstanding commercial loan at December 31, 2024 was $467,000 and the largest outstanding balance on that date was $8.1 million. Origination and Servicing of Loans. All loans originated for investment are underwritten pursuant to internally developed policies and procedures. While we generally underwrite owner-occupied residential mortgage loans to Freddie Mac and Fannie Mae standards.
The average outstanding commercial loan at December 31, 2025 was $226,000 and the largest outstanding balance on that date was $8.1 million. Origination and Servicing of Loans. All loans originated for investment are underwritten pursuant to internally developed policies and procedures. While we generally underwrite owner-occupied residential mortgage loans to Freddie Mac and Fannie Mae standards.
A security that is downgraded below investment grade will require additional analysis of creditworthiness and a determination will be made to hold or dispose of the investment. We regularly monitor the credit quality of this portfolio. At December 31, 2024, our municipal obligations portfolio totaled $47.1 million, all of which was classified as available for sale.
A security that is downgraded below investment grade will require additional analysis of creditworthiness and a determination will be made to hold or dispose of the investment. We regularly monitor the credit quality of this portfolio. At December 31, 2025, our municipal obligations portfolio totaled $54.1 million, all of which was classified as available for sale.
The unrealized losses for the other debt securities is due to the current slope of the yield curve. One security earns a floating rate that is indexed to the 10 year Treasury interest rate. As of December 31, 2024, no allowance for credit losses on securities was recognized.
The unrealized losses for the other debt securities is due to the current slope of the yield curve. The security earns a floating rate that is indexed to the 10 year Treasury interest rate. As of December 31, 2025, no allowance for credit losses on securities was recognized.
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.
Higher than anticipated rates of loan default would likely result in a need to increase provisions in future years. At December 31, 2025, the allowance for credit losses - loans was $17.5 million, compared to $18.2 million at December 31, 2024.
We do not know of any practice, condition or violation that might lead to termination of deposit insurance. - 21 - Capitalization Wisconsin Law and Regulation .
We do not know of any practice, condition or violation that might lead to termination of deposit insurance. - 18 - Capitalization Wisconsin 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 .
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, 2025, WaterStone Bank maintained 82.4% of its assets in qualified thrift investments and therefore met the qualified thrift lender requirement. Federal Law and Regulation .
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.
At December 31, 2025, our total federal pre-base year bad debt reserve was approximately $16.7 million. - 24 - 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.
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.
On a consolidated basis, Waterstone Mortgage Corporation originated $2.05 billion in mortgage loans held for sale during the year ended December 31, 2025, 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.
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.
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 $424,000 at December 31, 2025, and $505,000 at December 31, 2024. During the years ended December 31, 2025 and December 31, 2024, there was no significant activity.
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.
A total of 169 were WaterStone Bank employees and 424 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.
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.
As of June 30, 2025, based on the FDIC annual Summary of Deposits Report, we had the 9th largest market share in our metropolitan statistical area out of 44 financial institutions, representing 1.85% of all deposits. Our competition for loans and deposits comes principally from commercial banks, savings institutions, mortgage banking firms and credit unions.
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.
Of the $122,000 in net recoveries during the year ended December 31, 2025, the majority of the activity related to loans secured by one-to four-family and home equity 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.
No mortgage-backed securities were pledged as collateral for mortgage banking activities as of December 31, 2024.
No mortgage-backed securities were pledged as collateral for mortgage banking activities as of December 31, 2025.
There is also reinvestment risk associated with the cash flows from such securities or if such securities are redeemed by the issuer. In addition, the fair value of such securities may be adversely affected in a rising interest rate environment, particularly since all of our mortgage-backed securities have a fixed rate of interest. Government Sponsored Enterprise Bonds.
There is also reinvestment risk associated with the cash flows from such securities or if such securities are redeemed by the issuer. In addition, the fair value of such securities may be adversely affected in a rising interest rate environment, particularly since all of our mortgage-backed securities have a fixed rate of interest. Municipal Obligations.
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 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, 2025 and 2024 were $11.2 million and $13.3 million, respectively.
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.
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, 2025, mortgage-backed securities totaled $10.1 million.
Under the terms of the discontinued program, the employee interest rate is based on WaterStone Bank’s cost of funds on December 31st of the immediately preceding year and is adjusted annually. Employee rate mortgage loans totaled $466,000, or 0.1%, of our single family residential mortgage loan portfolio on December 31, 2024.
Under the terms of the discontinued program, the employee interest rate is based on WaterStone Bank’s cost of funds on December 31st of the immediately preceding year and is adjusted annually. Employee rate mortgage loans totaled $157,000, or less than 0.1%, of our single family residential mortgage loan portfolio on December 31, 2025.
Investment Activities Wauwatosa Investments, Inc. is WaterStone Bank’s investment subsidiary headquartered in the State of Nevada. Wauwatosa Investments, Inc. manages the back office function for WaterStone Bank’s investment portfolio. Our Chief Financial Officer and Treasury Officer are responsible for executing purchases and sales in accordance with our investment policy and monitoring the investment activities of Wauwatosa Investments, Inc.
Wauwatosa Investments, Inc. manages the back office function for WaterStone Bank’s investment portfolio. Our Chief Financial Officer and Treasury Officer are responsible for executing purchases and sales in accordance with our investment policy and monitoring the investment activities of Wauwatosa Investments, Inc.
Commercial business loans are generally variable rate loans with initial fixed rate periods of up to five years. A commercial business borrower’s financial information is monitored on an ongoing basis by requiring periodic financial statement updates, usually quarterly, payment history reviews and periodic face-to-face meetings with the borrower.
Interest rates on equipment loans may be either fixed or variable. Commercial business loans are generally variable rate loans with initial fixed rate periods of up to five years. A commercial business borrower’s financial information is monitored on an ongoing basis by requiring periodic financial statement updates, usually quarterly, payment history reviews and periodic face-to-face meetings with the borrower.
At June 30, 2024 (the latest date for which information was publicly available), 42.5% of deposits in the State of Wisconsin were located in the seven-county Milwaukee metropolitan market and 36.4% of deposits in the State of Wisconsin were located in the three counties in which the Bank has a branch office.
At June 30, 2025 (the latest date for which information was publicly available), 42.9% of deposits in the State of Wisconsin were located in the seven-county Milwaukee metropolitan market and 36.8% of deposits in the State of Wisconsin were located in the three counties in which the Bank has a branch office.
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.
At December 31, 2025 2024 Accruing Non-accruing Accruing Non-accruing (In Thousands) One- to four-family $ - $ 962 $ - $ - Commercial real estate 6,706 - - - $ 6,706 $ 962 $ - $ - 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.
Our borrowings at December 31, 2024 consisted of $443.6 million in advances from the Federal Home Loan Bank of Chicago and $3.0 million outstanding balance in short-term repurchase agreements used to fund loans held for sale. The following table sets forth information concerning balances and interest rates on borrowings at the dates and for the periods indicated.
Our borrowings at December 31, 2025 consisted of $406.1 million in advances from the Federal Home Loan Bank of Chicago and $6.2 million outstanding balance in short-term repurchase agreements used to fund loans held for sale. The following table sets forth information concerning balances and interest rates on borrowings at the dates and for the periods indicated.
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.
The increase in loans past due 90 days or more was primarily due to a increase in one-to four-family loans receivable during the year ended December 31, 2025. - 9 - Potential Problem Loans. We define potential problem loans as substandard loans which are still accruing interest.
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, 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 $19.8 million at December 31, 2025.
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.
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 $1.2 million on December 31, 2025, with the largest outstanding balance at $19.0 million.
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.
WaterStone Bank also has an active mortgage banking subsidiary, Waterstone Mortgage Corporation, which had 55 offices in 24 states as of December 31, 2025. WaterStone Bank conducts its community banking business from 14 banking offices located in Milwaukee, Washington and Waukesha counties, Wisconsin.
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.
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, 2025, WaterStone Bank had $406.1 million in advances from the Federal Home Loan Bank of Chicago.
As of December 31, 2024, the allowance for credit losses to total loans receivable was 1.09% and 322.10% of non-performing loans, compared to 1.11%, and 385.79%, respectively at December 31, 2023. The decrease in the allowance for credit losses during the year ended December 31, 2024 reflects the decrease in historical losses used in the calculation and certain qualitative factors.
As of December 31, 2025, the allowance for credit losses to total loans receivable was 1.04% and 283.04% of non-performing loans, compared to 1.09%, and 322.10%, respectively at December 31, 2024. The decrease in the allowance for credit losses during the year ended December 31, 2025 reflects the decrease in historical losses used in the calculation and certain qualitative factors.
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.
Loans originated for the purchase of a residential property, which generally yield a higher margin than loans originated for refinancing existing loans, comprised 87.1% of total originations during the year ended December 31, 2025, compared to 88.9% of total originations during the year ended December 31, 2024.
WaterStone Bank has not opted into the community bank leverage ratio. Safety and Soundness Standards Each federal banking agency, including the Federal Deposit Insurance Corporation, has adopted guidelines establishing general standards relating to internal controls, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits, and information security.
Safety and Soundness Standards Each federal banking agency, including the Federal Deposit Insurance Corporation, has adopted guidelines establishing general standards relating to internal controls, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits, and information security.
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 ratio of non-accrual loans to total loans receivable was 0.37% at December 31, 2025 compared to 0.34% at December 31, 2024. During the year ended December 31, 2025, $592,000 of loans were transferred to real estate owned, no loans were charged off, $1.1 million in principal payments were received and $3.8 million in loans were returned to accrual status.
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.
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 $202,000 on December 31, 2025, and the largest outstanding balance on that date was $12.5 million, which is a consolidation loan that is collateralized by multiple properties.
We also offer construction and land loans, home equity lines of credit and commercial loans. At December 31, 2024, commercial business loans, home equity loans, and construction and land loans totaled $34.1 million, $13.2 million and $61.4 million, respectively. The largest exposure to one borrower or group of related borrowers was $51.0 million in the construction category.
We also offer construction and land loans, home equity lines of credit and commercial loans. At December 31, 2025, commercial business loans, home equity loans, and construction and land loans totaled $33.4 million, $13.2 million and $56.3 million, respectively. The largest exposure to one borrower or group of related borrowers was $51.0 million in the construction category.
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.
Commercial Real Estate Loans. Commercial real estate loans totaled $327.3 million at December 31, 2025, or 19.5% 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.
At December 31, 2024, WaterStone Bank’s capital to assets ratio, as calculated under Wisconsin law, was 15.68%. Federal Law and Regulation .
At December 31, 2025, WaterStone Bank’s capital to assets ratio, as calculated under Wisconsin law, was 15.46%. Federal Law and Regulation .
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.
One- to four-family residential mortgage loans totaled $486.1 million, or 29.0% of total loans at December 31, 2025. 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.
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.
Offsetting this activity, $6.0 million in loans were placed on non-accrual status during the year ended December 31, 2025. Of the $6.2 million in total non-accrual loans as of December 31, 2025, $4.6 million in loans have been specifically reviewed to assess whether a specific valuation allowance is necessary.
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.
The remaining $1.6 million of non-accrual loans were reviewed on an aggregate basis as of December 31, 2025. The outstanding principal balance of our five largest non-accrual loans as of December 31, 2025 totaled $2.7 million, which represents 44% of total non-accrual loans as of that date.
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 .
As of December 31, 2025, Waterstone Mortgage Corporation had nine offices in Florida, six offices in New Mexico, five offices in Wisconsin, four offices each in Oklahoma and Texas, three offices each in Arizona and Virginia, two offices each in Idaho, Maryland, Minnesota, and Montana and one office each in California, Colorado, Iowa, Illinois, Kansas, Massachusetts, New Hampshire, New Jersey, North Carolina, Rhode Island, South Dakota, Tennessee, and Wyoming. - 3 - Competition WaterStone Bank .
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.
At December 31, 2025, collateralized mortgage obligations totaled $152.3 million. At December 31, 2025, 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 3.1% and a weighted average remaining life of 5.2 years at December 31, 2025.
We had net recoveries of $40,000, or less than 0.01% of average loans annualized, for the year ended December 31, 2024, compared to net charge-offs of $135,000 or 0.01% of average loans annualized, for the year ended December 31, 2023.
We had net recoveries of $122,000, or less than 0.01% of average loans annualized, for the year ended December 31, 2025, compared to net recoveries of $40,000 , or less than 0.01% of average loans annualized, for the year ended December 31, 2024.
The mortgage-backed securities portfolio had a weighted average yield of 2.50% and a weighted average remaining life of 9.9 years at December 31, 2024. The estimated fair value of our mortgage-backed securities portfolio at December 31, 2024 was $1.7 million less than the amortized cost of $11.3 million.
The mortgage-backed securities portfolio had a weighted average yield of 2.84% and a weighted average remaining life of 10.9 years at December 31, 2025. The estimated fair value of our mortgage-backed securities portfolio at December 31, 2025 was $1.2 million less than the amortized cost of $11.4 million.
At December 31, 2024 2023 2022 (Dollars in Thousands) Non-accrual loans: Residential One- to four-family $ 5,515 $ 4,503 $ 4,209 Multi family - - - Home equity 150 90 98 Construction and land - - - Commercial real estate - 215 - Commercial - - - Consumer - - - Total non-accrual loans 5,665 4,808 4,307 Real estate owned One- to four-family 370 109 - Multi family - - - Construction and land 135 145 145 Commercial real estate - - - Total real estate owned 505 254 145 Total nonperforming assets $ 6,170 $ 5,062 $ 4,452 Total non-accrual loans to total loans, net 0.34 % 0.29 % 0.29 % Total non-accrual loans to total assets 0.26 % 0.22 % 0.21 % Total nonperforming assets to total assets 0.28 % 0.23 % 0.22 % All loans that meet or exceed 90 days with respect to past due principal and interest are recognized as non-accrual.
At December 31, 2025 2024 2023 (Dollars in Thousands) Non-accrual loans: Residential One- to four-family $ 5,861 $ 5,515 $ 4,503 Multi family 177 - - Home equity 14 150 90 Construction and land - - - Commercial real estate 123 - 215 Commercial - - - Consumer - - - Total non-accrual loans 6,175 5,665 4,808 Real estate owned One- to four-family 106 370 109 Multi family - - - Construction and land - 135 145 Commercial real estate 318 - - Total real estate owned 424 505 254 Total nonperforming assets $ 6,599 $ 6,170 $ 5,062 Total non-accrual loans to total loans, net 0.37 % 0.34 % 0.29 % Total non-accrual loans to total assets 0.27 % 0.26 % 0.22 % Total nonperforming assets to total assets 0.29 % 0.28 % 0.23 % All loans that meet or exceed 90 days with respect to past due principal and interest are recognized as non-accrual.
A total of 31% of our one- to four-family loans are collateralized by properties in the state of Wisconsin. Multi-family Real Estate Loans. Multi-family loans totaled $741.4 million, or 44.1% of total loans at December 31, 2024. These loans are generally secured by properties located in our primary market area.
A total of 35% of our one- to four-family loans are collateralized by properties in the state of Wisconsin. Multi-family Real Estate Loans. Multi-family loans totaled $758.4 million, or 45.3% of total loans at December 31, 2025. These loans are generally secured by properties located in our primary market area.
We originate construction loans for the acquisition of land and the construction of single-family residences, multi-family residences, and commercial real estate buildings. At December 31, 2024, construction and land loans totaled $61.4 million, or 3.7% of total loans. A total of $72.8 million had yet to be advanced as of December 31, 2024.
We originate construction loans for the acquisition of land and the construction of single-family residences, multi-family residences, and commercial real estate buildings. At December 31, 2025, construction and land loans totaled $56.3 million, or 3.4% of total loans. A total of $44.6 million had yet to be advanced as of December 31, 2025.
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.
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, 2025, certificates of deposit comprised 64.9% of total customer deposits, and had a weighted average cost of 3.47% on that date.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, it may have a material adverse effect on our financial condition and results of operations. - 30 - Risks Related to Lending Matters We intend to increase our commercial business lending, and we intend to continue our commercial real estate and multi-family residential real estate lending, which may expose us to increased lending risks and have a negative effect on our results of operations.
Biggest changeDifficult conditions in the regional business and economic environment, including those caused by the lack of stability and predictability of U.S. policymaking, may materially adversely affect our operating expenses, the quality of our assets, credit losses, and the demand for our products and services. - 27 - Risks Related to Lending Matters We intend to increase our commercial business lending, and we intend to continue our commercial real estate and multi-family residential real estate lending, which may expose us to increased lending risks and have a negative effect on our results of operations.
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.
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.
See “Management’s Discussion and Analysis of Financial Condition" and "Quantitative and Qualitative Disclosures About Market Risk—Management of Market Risk.” - 29 - Hedging against interest rate exposure may adversely affect our earnings On occasion we have employed various financial risk methodologies that limit, or “hedge,” the adverse effects of rising or decreasing interest rates on our loan portfolios and short-term liabilities.
See “Management’s Discussion and Analysis of Financial Condition" and "Quantitative and Qualitative Disclosures About Market Risk—Management of Market Risk.” - 26 - Hedging against interest rate exposure may adversely affect our earnings On occasion we have employed various financial risk methodologies that limit, or “hedge,” the adverse effects of rising or decreasing interest rates on our loan portfolios and short-term liabilities.
Because we carry these assets on our books at their estimated fair value, we may incur losses even if the asset in question presents minimal credit risk. - 34 - Other Risks Related to Our Business Legal and regulatory proceedings and related matters could adversely affect us or the financial services industry in general.
Because we carry these assets on our books at their estimated fair value, we may incur losses even if the asset in question presents minimal credit risk. - 32 - Other Risks Related to Our Business Legal and regulatory proceedings and related matters could adversely affect us or the financial services industry in general.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us. - 31 - Risks Related to Operational Matters We rely heavily on certificates of deposit, which has increased our cost of funds and could continue to do so in the future.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us. - 28 - Risks Related to Operational Matters We rely heavily on certificates of deposit, which has increased our cost of funds and could continue to do so in the future.
New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure. - 35 - Acquisitions may disrupt our business and dilute stockholder value. We regularly evaluate merger and acquisition opportunities with other financial institutions and financial services companies.
New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure. - 33 - Acquisitions may disrupt our business and dilute stockholder value. We regularly evaluate merger and acquisition opportunities with other financial institutions and financial services companies.
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.
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, 2025, certificates of deposit comprised 64.9% of our total deposits as compared to 66.6% at December 31, 2024.
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.
During the year ended December 31, 2025, we incurred other comprehensive income of $6.5 million, net of tax expenses, 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.
Our loans to businesses and individuals and our deposit relationships and related transactions are subject to exposure to the risk of loss due to fraud and other financial crimes. We have experienced losses due to apparent fraud and other financial crimes. While we have policies and procedures designed to prevent such losses, losses may still occur.
Our loans to businesses and individuals and our deposit relationships and related transactions are subject to exposure to the risk of loss due to fraud and other financial crimes. We have experienced losses due to apparent fraud and other financial crimes.
We also earn interest on loans held for sale while awaiting delivery to our investors. In this rising and higher interest rate environment, our mortgage loan originations have decreased, resulting in fewer loans that are available for sale. This resulted in a decrease in interest income and a decrease in revenues from loan sales.
In this rising and higher interest rate environment, our mortgage loan originations have decreased, resulting in fewer loans that are available for sale. This resulted in a decrease in interest income and a decrease in revenues from loan sales.
In 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.
In this case, our operating margins and profitability would be adversely affected. - 30 - 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.
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.
Generally, the value of securities moves inversely with changes in interest rates. At December 31, 2025, the fair value of our investment portfolio totaled $230.8 million. Net unrealized losses on these securities totaled $15.7 million at December 31, 2025.
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.
Financial services institutions are interrelated as a result of trading, clearing, counterparty and other relationships. 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.
During periods of reduced loan demand, our results of operations may continue to be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in mortgage loan origination activity.
During periods of reduced loan demand, our results of operations may continue to be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in mortgage loan origination activity. We experienced a continued shift in deposits from lower-cost (savings and NOW) accounts to higher-cost certificates of deposit.
The committee meets quarterly, or more frequently if needed, and reports to the board of directors after each meeting through committee minutes. We also engage outside consultants to support its cybersecurity efforts.
The Bank has an Information Technology Committee, consisting of the President, Chief Retail Officer, Chief Information Officer, Chief Financial Officer and staff from other departments within our organization. The committee meets quarterly, or more frequently if needed, and reports to the board of directors after each meeting through committee minutes. We also engage outside consultants to support its cybersecurity efforts.
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.
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 also earn interest on loans held for sale while awaiting delivery to our investors.
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.
This could result in lower fee income, and loss of deposits, related to our payments processing business. - 31 - 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.
Their use also affects interest rates charged on loans or paid on deposits. - 28 - We are subject to the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to material penalties.
Their use also affects interest rates charged on loans or paid on deposits.
Removed
In addition, as a result of rising interest rates, we have experienced a shift in deposits from lower-cost (savings, NOW, and money market) accounts to higher-cost certificates of deposit.
Added
The Federal Reserve Board's policies determine in large part the cost of funds for lending and investing and the return earned on those loans and investments, both of which affect our net interest margin. Its policies can also adversely affect borrowers, potentially increasing the risk that they may fail to repay their loans.
Removed
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.
Added
Changes in Federal Reserve Board and other governmental policies, fiscal policy, and our regulatory environment generally are beyond our control, and we are unable to predict what changes may occur or the manner in which any future changes may affect our business, financial condition and results of operations. - 25 - We are subject to the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to material penalties.
Removed
On March 9, 2023, Silvergate Bank, La Jolla, California, announced its decision to voluntarily liquidate its assets and wind down operations. On March 10, 2023, Silicon Valley Bank, Santa Clara, California, was closed by the California Department of Financial Protection and Innovation.
Added
Although fed funds interest rate decreased in the past year, we continue to keep rates competitive in a challenging and competitive market.
Removed
On March 12, 2023, Signature Bank, New York, New York, was closed by the New York State Department of Financial Services, and on May 1, 2023, First Republic Bank, San Francisco, California, was closed by the California Department of Financial Protection and Innovation.
Added
Significant changes to the size, structure, powers and operations of the federal government, changes to U.S. economic policies, and uncertainties regarding the potential for these changes may cause economic disruptions that could, in turn, adversely impact our business, results of operations and financial condition.
Removed
These banks also had elevated levels of uninsured deposits, which may be less likely to remain at the bank over time and less stable as a source of funding than insured deposits. These failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions.
Added
The current U.S. administration also has implemented rapid shifts in macroeconomic policies, such as those relating to trade restrictions and tariffs, which have created significant uncertainties regarding U.S. economic growth, the potential for recession, and concerns over an increase in inflation.
Removed
These events have led to a greater focus by institutions, investors and regulators on the on-balance sheet liquidity of and funding sources for financial institutions, the composition of its deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management.
Added
Slow economic growth, economic contraction or recession, or shifts in broader consumer and business trends would significantly impact our ability to originate loans, the ability of borrowers to repay loans, and the value of the collateral securing loans.
Removed
Our board of directors relies to a large degree on management and outside consultants in overseeing cybersecurity risk management. The Bank has an Information Technology Committee, consisting of the President, Chief Retail Officer, Chief Information Officer, Chief Financial Officer and staff from other departments within our organization.
Added
Other political and economic events within the United States, including a contentious domestic political environment, changes in or disagreements over U.S. monetary policy and actions of the FRS, disagreements over long-term federal budget and deficit reduction plans, disagreements over, or threats not to increase, the U.S. government’s borrowing limit (or “debt ceiling”), and risk of further downgrade of the ratings of U.S. government debt obligations, also may negatively impact financial markets and the U.S. economy.
Added
Further, the perception of the potential for additional, significant changes in federal regulatory or economic policy also has increased uncertainty and may exacerbate declines in investor and consumer confidence, which in turn may adversely impact financial markets and the broader economy of the U.S. Regional business and economic conditions are a major driver of our results of operations.
Added
While we have policies and procedures designed to prevent such losses, losses may still occur. - 29 - Fraud by merchants or others could have a material adverse effect on our business and financial condition. We may be liable for fraudulent transactions initiated by merchants or others.
Added
Examples of fraud include when a merchant or other party knowingly uses a stolen or counterfeit card to make a transaction, or if a merchant intentionally fails to deliver the merchandise or services sold in an otherwise valid transaction. Criminals are using increasingly sophisticated methods to engage in illegal activities such as counterfeiting and fraud.
Added
It is possible that incidents of fraud could increase in the future. Failure to effectively manage risk and prevent fraud would increase our chargeback liability or other liability. Increases in chargebacks or other liability could have a material adverse effect on our business, financial condition, and results of operations.
Added
The potential for fraud in the card payment industry is significant and could adversely affect our business and results of operations. Issuers of prepaid and debit cards and other companies have suffered significant losses in recent years with respect to the theft of cardholder data that has been illegally exploited for personal gain.
Added
The theft of such information is regularly reported and affects individuals and businesses. Losses from various types of fraud have been substantial for certain card industry participants. We also rely upon third parties for transaction processing services, which subjects us and our customers to risks related to the vulnerabilities of those third parties.
Added
We, in many cases, have indemnification agreements with third parties; however, these agreements may not fully cover losses. Fraudulent activity could also result in the imposition of regulatory sanctions, including significant monetary fines, which could adversely affect our business, results of operations and financial condition.
Added
Although fraud has not had a material impact on our profitability, it is possible that such activity could adversely impact profitability in the future. We face funds transfer and payments-related risks. As a financial institution, we bear funds transfer risks of different types, which result from large transaction volumes and large dollar amounts of incoming and outgoing money transfers.
Added
Loss exposure may result if money is transferred before it is received, or legal rights to reclaim monies transferred are asserted, including payments made to merchants for payment clearing, while customers have statutory periods to reverse their payments. Exposure also results from payments made prior to receipt of offsetting funds, as accommodations to customers.
Added
We are subject to unique settlement risks as our transfers may be larger than typical financial institutions of our size. Transfers could also be made in error or as a result of fraud.
Added
Additionally, as with other financial institutions, we may incur legal liability or reputational risk, if we unknowingly process payments for companies in violation of money laundering laws or other regulations or immoral activities.
Added
Our reliance on and integration of artificial intelligence (AI) and machine learning (ML) technologies expose us to various risks, including operational, data, regulatory, and reputational risks, which could materially affect our business and financial results. ● Operational & Model Risk: Our AI/ML models, used for credit scoring, fraud detection, customer service, and investment decisions, rely on complex algorithms and vast datasets.
Added
Errors, biases, or "hallucinations" (generating false information) in these models, or unexpected system failures, could lead to flawed decisions, financial losses, compliance failures, or degraded customer experiences, impacting profitability and client retention. ● Data Security & Privacy: AI systems process sensitive customer data.
Added
Security breaches or unauthorized access to these systems could result in data theft, loss of intellectual property, and significant penalties, damaging customer trust. ● Regulatory & Compliance Risk: The regulatory landscape for AI is rapidly evolving.
Added
New laws could impose costly compliance burdens, restrict AI use, or introduce liabilities, particularly concerning algorithmic bias and fair lending practices (e.g., "digital redlining"), potentially increasing operational costs and limiting service offerings. ● Talent & Third-Party Risk: Attracting and retaining skilled AI professionals is crucial and competitive.
Added
We also depend on third-party AI vendors, creating dependency risks and potential issues with data handling, model reliability, and licensing, all of which could disrupt operations. ● Reputational & Ethical Risk: Misuse of AI, biased outcomes, or privacy violations can harm our brand, erode customer confidence, and attract negative public attention, potentially affecting demand for our services.
Added
If we cannot effectively manage these challenges, including adapting to rapid technological change and ensuring responsible AI governance, our reputation, competitive position, and financial performance could be significantly harmed. Our board of directors relies to a large degree on management and outside consultants in overseeing cybersecurity risk management.
Added
Competitive factors driven by consumer sentiment or otherwise can also reduce our ability to generate fee income, such as through overdraft fees. The grant of bank charters and special purpose fintech charters by the Office of the Comptroller of the Currency to fintech companies could present financial risk and market risk to us generally and the payments processing business specifically.
Added
In 2018, the Office of the Comptroller of the Currency announced that it would begin to accept and evaluate charters for entities that wanted to conduct certain components of a banking business pursuant to a federal charter, known as a special purpose national bank charter.
Added
Intended to promote economic opportunity and spur financial innovation, an institution with a special purpose national bank charter may engage in paying checks, lending money and taking deposits. The Office of the Comptroller of the Currency has granted national bank charters to companies that were previously non-bank fintech companies.
Added
If, in the future, the Office of the Comptroller of the Currency determines to grant any special purpose national bank charter applications or continues to grant bank charters to fintech applicants, recipients of such charters may enter the U.S. payments market and other business activities that we conduct, which could increase the competition we face and have a material adverse effect on us.

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, 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.
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, 2025, Waterstone Mortgage Corporation had nine offices in Florida, six offices in New Mexico, five offices in Wisconsin, four offices each in Oklahoma and Texas, three offices each in Arizona and Virginia, two offices each in Idaho, Maryland, Minnesota, and Montana and one office each in California, Colorado, Iowa, Illinois, Kansas, Massachusetts, New Hampshire, New Jersey, North Carolina, Rhode Island, South Dakota, Tennessee, and Wyoming.
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.
The following table sets forth information with respect to our corporate center and our full-service banking offices as of December 31, 2025. 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 $19.4 million at December 31, 2024.
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 $18.9 million at December 31, 2025.

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, 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.
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, 2025 - October 31, 2025 68,197 $ 15.07 68,197 574,407 November 1, 2025 - November 30, 2025 67,633 15.59 67,633 506,774 December 1, 2025 - December 31, 2025 38,568 16.66 38,568 468,206 Total 174,398 15.62 174,398 468,206 (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 KBW Nasdaq Bank Index and the Russell 2000.
(b) Includes 1% excise tax for repurchases greater than $1.0 million - 37 - 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, 2019, in Waterstone Financial, Inc. common stock and each of those indices. Waterstone Financial, Inc.
The graph assumes $100 was invested on December 31, 2020, 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 21, 2025 was 1,400.
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 20, 2026 was 914.
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.
On that same date there were 18,359,930 shares of common stock issued and outstanding. Following are the Company's monthly common stock repurchases during the fourth quarter of 2025.
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]
Index 12/31/20 12/31/21 12/31/22 12/31/23 12/30/24 12/30/25 Waterstone Financial, Inc. 100.00 123.92 104.40 90.73 89.92 115.79 KBW NASDAQ Bank Index 100.00 138.33 108.73 107.76 147.85 196.00 Russell 2000 Index 100.00 114.82 91.35 106.82 119.14 134.40 Item 6 . [Reserved]

Item 7. Management's Discussion & Analysis

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

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Biggest changeYears 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.
Biggest changeYears Ended December 31, 2025 2024 2023 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) $ 1,808,505 104,753 5.79 % $ 1,838,761 103,066 5.61 % $ 1,752,806 90,148 5.14 % Mortgage related securities (2) 175,698 5,215 2.97 % 170,671 4,496 2.63 % 172,318 4,053 2.35 % Debt securities, federal funds sold and short-term investments (2)(3) 129,947 6,140 4.73 % 114,617 5,606 4.89 % 119,650 5,007 4.18 % Total interest-earning assets 2,114,150 116,108 5.49 % 2,124,049 113,168 5.33 % 2,044,774 99,208 4.85 % Noninterest-earning assets 105,272 103,284 106,532 Total assets $ 2,219,422 $ 2,227,333 $ 2,151,306 Liabilities and equity Interest-bearing liabilities: Demand accounts $ 89,826 95 0.11 % 90,068 98 0.11 % 80,143 82 0.10 % Money market and savings accounts 323,950 6,724 2.08 % 296,361 5,654 1.91 % 309,119 4,529 1.47 % Certificates of deposit 824,018 33,240 4.03 % 773,616 34,193 4.42 % 700,034 21,127 3.02 % Certificates of deposit - brokered 84,197 3,460 4.11 % 15,004 628 4.19 % - - 0.00 % Total interest-bearing deposits 1,321,991 43,519 3.29 % 1,175,049 40,573 3.45 % 1,089,296 25,738 2.36 % Borrowings 423,945 15,855 3.74 % 572,539 26,427 4.62 % 532,248 23,255 4.37 % Total interest-bearing liabilities 1,745,936 59,374 3.40 % 1,747,588 67,000 3.83 % 1,621,544 48,993 3.02 % Noninterest-bearing liabilities Non interest-bearing deposits 86,160 91,288 120,321 Other noninterest-bearing liabilities 41,069 47,680 51,439 Total noninterest-bearing liabilities 127,229 138,968 171,760 Total liabilities 1,873,165 1,886,556 1,793,304 Equity 346,257 340,777 358,002 Total liabilities and equity $ 2,219,422 $ 2,227,333 $ 2,151,306 Net interest income / Net interest rate spread (4) 56,734 2.09 % 46,168 1.50 % 50,215 1.83 % Net interest-earning assets (5) $ 368,214 $ 376,461 $ 423,230 Net interest margin (6) 2.68 % 2.17 % 2.46 % Average interest-earning assets to average interest-bearing liabilities 121.09 % 121.54 % 126.10 % (1) Includes net deferred loan fee amortization income of $565,000, $663,000, and $643,000 for the years ended December 31, 2025, 2024, and 2023, respectively.
Interest and penalties on income tax uncertainties are classified within income tax expense in the consolidated statements of operations. Fair Value Measurements. The Company determines the fair value of its assets and liabilities in accordance with ASC 820. ASC 820 establishes a standard framework for measuring and disclosing fair value under generally accepted accounting principles.
Interest and penalties on income tax uncertainties are classified within income tax expense in the consolidated statements of operations. - 39 - Fair Value Measurements. The Company determines the fair value of its assets and liabilities in accordance with ASC 820. ASC 820 establishes a standard framework for measuring and disclosing fair value under generally accepted accounting principles.
See further discussion regarding the allowance for loan losses in the "Asset Quality" section for an analysis of charge-offs, nonperforming assets, specific reserves and additional provisions and the "Allowance for Credit Loss" section.
See further discussion regarding the allowance for credit losses in the "Asset Quality" section for an analysis of charge-offs, nonperforming assets, specific reserves and additional provisions and the "Allowance for Credit Loss" section.
(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.
(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, 2025, 2024, and 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.
See "Comparison of Mortgage Banking Segment Results of Operations for the Year December 31, 2025 and 2024" 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. • The decrease in other noninterest income was due primarily to an decrease in gain on sale of mortgage servicing rights.
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.
During the year ended December 31, 2025, we made adjustments to our qualitative factors, primarily to account for the changes in internal metrics and external risk factors. See Note 3 - Loans Receivable of the notes to consolidated financial statements for further discussion on the allowance for credit losses.
(6) Net interest margin represents net interest income divided by average total interest-earning assets. - 48 - Rate/Volume Analysis The following table sets forth the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume).
(6) Net interest margin represents net interest income divided by average total interest-earning assets. - 44 - Rate/Volume Analysis The following table sets forth the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume).
(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.
(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, 2025 and at December 31, 2024 Total Assets.
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.
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, 2025, we made adjustments to our qualitative factors, primarily to account for the changes in internal metrics and external risk 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. The forecast factor remained unchanged as we monitor the economic environment going forward.
During the year ended December 31, 2025, we made adjustments to our qualitative factors, primarily to account for the changes in internal metrics and external risk factors. The forecast factor remained unchanged as we monitor the economic environment going forward.
(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.
(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, 2025, 2024, and 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. Comparison of Consolidated Waterstone Financial, Inc.
The decrease primarily related to decreased salary expense and commissions expense driven by reduced employee headcount and a decrease in new branches added over the past year. Comparison of Consolidated Waterstone Financial, Inc.
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.
Other noninterest expense decreased $219,000 million to $2.3 million as certain loan-related expenses paid to the mortgage banking segment for the purchase of single-family adjustable rate mortgage loans decreased compared to the prior year. These fees are eliminated in the consolidated statements of income.
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.
The percentage of origination volume related to purchase activity decreased from 88.9% to 87.1% of total originations for the year ended December 31, 2025 and 2024, respectively, as a year-over-year decrease in rates drove an increase in refinance activity, while low housing inventory and still relatively high interest rates suppressed purchase activity.
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.
Income tax expense was recognized during the year ended December 31, 2025 at an effective rate of 21.1% compared to an effective rate of 22.1% during the year ended December 31, 2024. On March 18, 2024, the State of Wisconsin Department of Revenue issued an emergency ruling with additional details of the law.
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.
At December 31, 2025 and 2024, $71.1 million and $39.8 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, 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.
At December 31, 2025, certificates of deposit scheduled to mature in less than one year totaled $891.6 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.
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.
The negative provision for credit losses consisted of a $891,000 negative provision related to adjustments to our qualitative factors, primarily to account for the changes in internal metrics and external risk factors and a $503,000 negative provision related to unfunded commitments as the loan pipeline balance decreased for the year ended December 31, 2025.
During the year ended December 31, 2024, 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 and a $152,000 gain.
During the year ended December 31, 2025, the Company had no sales of mortgage servicing rights. During the year ended December 31, 2024, the Company sold mortgage servicing rights related to $233.0 million in loans serviced for third parties. The sale generated $2.1 million in net proceeds and a $152,000 gain.
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.
At December 31, 2025, we had $190.0 million in long term advances from the FHLB with contractual maturity dates in 2027, 2028, 2029, and 2030. See Note 7 - Borrowings of the notes to audited consolidated financial statements for additional information about the remaining call option details of our FHLB long-term debt.
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.
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 increased by $10.3 million, or 3.0%, to $349.4 million at December 31, 2025 from $339.1 million at December 31, 2024.
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.
Comparison of Mortgage Banking Segment Operations for the Years Ended December 31, 2025 and 2024 Net income totaled $1.4 million for the year ended December 31, 2025 compared to net income of $1.4 million for the year ended December 31, 2024.
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.
The decrease primarily related to decreased salary expense and commission 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 $236,000 or 1.1%, to $20.9 million during the year ended December 31, 2025.
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 .
Cash and Cash Equivalents. Cash and cash equivalents increased $31.3 million to $71.1 million at December 31, 2025 from $39.8 million at December 31, 2024. The increase in cash and cash equivalents primarily reflects the decrease in funding of loans held for investment and increase in deposit liabilities. Securities Available for Sale .
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.
For a discussion of our results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, 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 2024 Form 10-K, filed with the SEC on March 6, 2024. - 38 - Significant Items There were no Significant Items for the years ended December 31, 2025 and 2024.
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.
Comparison of Community Banking Segment Operations for the Years Ended December 31, 2025 and 2024 Net income from our community banking segment for the year ended December 31, 2025 totaled $24.8 million compared to $17.0 million for the year ended December 31, 2024.
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.
Results of Operations for the Years Ended December 31, 2025 and 2024 Years Ended December 31, 2025 2024 (Dollars In Thousands, except per share amounts) Net income $ 26,402 $ 18,688 Earnings per share - basic 1.48 1.01 Earnings per share - diluted 1.48 1.01 Return on average assets 1.19 % 0.84 % Return on average equity 7.62 % 5.48 % - 43 - 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.
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.
We purchased $50.0 million and $34.3 million in debt securities and mortgage related securities classified as available for sale during the years ended December 31, 2025 and 2024, respectively. The net changes in deposits were a net increase of $77.4 million and a net increase of $169.3 million for the year ending December 31, 2025 and 2024, respectively.
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.
The decrease in mortgage banking noninterest income was related to a 4.6% decrease in volume and a 1.0% decrease in gross margin on loans originated and sold for the year ended December 31, 2025 compared to December 31, 2024.
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.
During the years ended December 31, 2025 and 2024, we paid cash dividends on common stock of $10.8 million and $11.3 million, respectively. Deposits increased by $77.4 million from December 31, 2024 to December 31, 2025.
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.
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, 2025, compared the year ended December 31, 2024, which focuses on noninterest income and noninterest expenses.
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.
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 $10.3 million to $38.0 million at December 31, 2025 from $48.3 million at December 31, 2024.
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.
The $1.4 negative provision for credit losses consisted of a $893,000 negative provision related to loans and $503,000 of negative provision related to unfunded commitments for the year ended December 31, 2025. The decrease in the loan portfolio provision is due to the decrease in historical loss factors and certain qualitative factors.
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.
The increase was primarily due to an increase in salaries and variable compensation. • Occupancy, office furniture and equipment expense at the mortgage banking segment decreased $596,000 to $3.3 million during the year ended December 31, 2025 primarily resulting from decreased rent and depreciation expenses as underperforming branches were closed over the past year. • Occupancy, office furniture and equipment expense at the community banking segment increased $217,000 to $3.9 million during the year ended December 31, 2025 compared to the prior year.
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.
The mix of loan type trended towards more government loans and less conventional loans, with a mix of 38.7% and 61.3%, respectively of all loan originations, respectively, during the year ended December 31, 2025, compared to 36.2% and 63.8% of all originations, respectively, during the year ended December 31, 2024.
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.
The allowance for credit losses decreased $769,000 to $17.5 million at December 31, 2025 from $18.2 million at December 31, 2024. The decrease primarily resulted from a decrease in historical loss rates and decreases in certain qualitative factors. Net recoveries totaled $122,000 for the year ended December 31, 2025.
There was a decrease in net borrowings of $164.5 million for the year ended December 31, 2024 and a net increase in borrowings of $224.3 million for the year ended December 31, 2023. During the years ended December 31, 2024 and 2023, we repurchased common stock of $14.9 million and $26.0 million, respectively.
There was a decrease in net borrowings of $34.3 million for the year ended December 31, 2025 and a net decrease in borrowings of $164.5 million for the year ended December 31, 2024. During the years ended December 31, 2025 and 2024, we repurchased common stock of $16.2 million and $14.9 million, respectively.
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.
The Company had approximately $378.5 million of uninsured deposits for approximately 1,487 customers as of December 31, 2025. Uninsured deposit amounts are estimated based on the portions of customer account balances that exceed the FDIC insurance limits. - 48 - At December 31, 2025, we had outstanding commitments to originate loans receivable of $12.7 million.
See Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements contains a further discussion of our significant accounting policies. Critical accounting policies are those that involve significant judgments and assumptions by management and that have, or could have, a material impact on our income or the carrying value of our assets. Allowance for Credit Losses.
Critical accounting policies are those that involve significant judgments and assumptions by management and that have, or could have, a material impact on our income or the carrying value of our assets. Allowance for Credit Losses.
At 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.
At or for the Year Ended December 31, 2025 2024 2023 (In Thousands, except per share amounts) Selected Financial Condition Data: Total assets $ 2,259,507 $ 2,209,608 $ 2,213,389 Cash and cash equivalents 71,107 39,761 36,421 Securities available for sale 230,848 208,549 204,907 Loans held for sale 145,057 135,909 164,993 Loans receivable 1,675,552 1,680,576 1,664,215 Allowance for credit losses 17,478 18,247 18,549 Loans receivable, net 1,658,074 1,662,329 1,645,666 Real estate owned, net 424 505 254 Deposits 1,437,272 1,359,897 1,190,624 Borrowings 412,258 446,519 611,054 Total shareholders' equity 349,392 339,135 344,056 Selected Operating Data: Interest income $ 116,108 $ 113,168 $ 99,208 Interest expense 59,374 67,000 48,993 Net interest income 56,734 46,168 50,215 Provision (credit) for credit losses (1,394 ) (168 ) 656 Net interest income after provision for credit losses 58,128 46,336 49,559 Noninterest income 85,187 89,302 81,185 Noninterest expense 109,870 111,636 119,712 Income before income taxes 33,445 24,002 11,032 Provision for income taxes 7,043 5,314 1,657 Net income $ 26,402 $ 18,688 $ 9,375 Per common share: Income per share - basic $ 1.48 $ 1.01 $ 0.47 Income per share - diluted $ 1.48 $ 1.01 $ 0.46 Book value $ 19.03 $ 17.53 $ 16.94 Dividends declared $ 0.60 $ 0.60 $ 0.70 - 40 - At or for the Year Ended December 31, 2025 2024 2023 Selected Financial Ratios and Other Data: Performance Ratios: Return on average assets 1.19 % 0.84 % 0.44 % Return on average equity 7.62 5.48 2.62 Interest rate spread (1) 2.09 1.51 1.83 Net interest margin (2) 2.68 2.17 2.46 Noninterest expense to average assets 4.95 5.01 5.56 Efficiency ratio (3) 77.42 82.41 91.11 Average interest-earning assets to average interest-bearing liabilities 121.09 121.54 126.10 Dividend payout ratio (4) 40.54 59.41 148.94 Capital Ratios: Waterstone Financial, Inc.: Equity to total assets at end of period 15.46 % 15.35 % 15.54 % Average equity to average assets 15.60 15.30 16.64 Total capital to risk-weighted assets 21.13 20.90 21.50 Tier 1 capital to risk-weighted assets 20.11 19.81 20.39 Common equity tier 1 capital to risk-weighted assets 20.11 19.81 20.39 Tier 1 capital to average assets 15.94 16.04 16.77 WaterStone Bank: Total capital to risk-weighted assets 20.49 20.29 20.10 Tier 1 capital to risk-weighted assets 19.47 19.21 18.99 Common equity tier 1 capital to risk-weighted assets 19.47 19.21 18.99 Tier 1 capital to average assets 15.43 15.55 15.62 Asset Quality Ratios: Allowance for credit losses - loans as a percent of total loans 1.04 % 1.09 % 1.11 % Allowance for credit losses - loans as a percent of non-performing loans 283.04 322.10 385.79 Net (recoveries) charge-offs to average outstanding loans during the period (0.01 ) (0.00 ) 0.01 Non-performing loans as a percent of total loans 0.37 0.34 0.29 Non-performing assets as a percent of total assets 0.29 0.28 0.23 Other Data: Number of full-service banking offices 14 14 14 Number of full-time equivalent employees 593 600 698 (1) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.
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.
The increase primarily related to increased provision for loan sale losses, provision for branch losses, mortgage servicing rights amortization, and branch overhead at the mortgage banking segment. - 47 - Income Taxes Income tax expense increased $1.7 million to $7.0 million during the year ended December 31, 2025, compared to $5.3 million during the year ended December 31, 2024 as pretax income increased by $9.4 million.
See Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements describes the methodology used to determine the ACL. - 42 - In addition, state and federal regulators periodically review the WaterStone Bank allowance for credit losses.
See Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements describes the methodology used to determine the ACL. In addition, state and federal regulators periodically review the WaterStone Bank allowance for credit losses. Such regulators have the authority to require WaterStone Bank to recognize additions to the allowance at the time of their examination. Income Taxes.
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.
Loans receivable held for investment decreased $5.0 million, or 0.3%, to $1.68 billion at December 31, 2025 from $1.68 billion at December 31, 2024. The decrease in total loans receivable was primarily attributable to a decrease in the one-to-four family loan category and was partially offset by increases in the multi-family and commercial real estate categories. Allowance for Credit Losses.
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.
Total loan origination volume on a consolidated basis decreased $85.1 million, or 4.0%, to $2.05 billion during the year ended December 31, 2025 compared to $2.13 billion during the year ended December 31, 2024. Gross margin on loans originated and sold decreased 1.0% at the mortgage banking segment.
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.
Waterstone Financial, Inc. and WaterStone Bank are subject to various regulatory capital requirements, including a risk-based capital measure. 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.
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.
We originated $2.05 billion in mortgage loans held for sale (including sales to the community banking segment) during the year ended December 31, 2025, which represents a decrease of $98.0 million, or 4.6%, from the $2.15 billion originated during the year ended December 31, 2024.
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.
Total compensation, payroll taxes and other employee benefits decreased $1.8 million, or 2.9%, to $59.6 million for the year ended December 31, 2025 compared to $61.4 million for the year ended December 31, 2024.
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.
The yields on debt securities, federal funds sold and short-term investments after tax-equivalent adjustments were 4.94%, 5.11%, and 4.35% for the years ended December 31, 2025, 2024, and 2023, respectively.
The provision for income taxes is based upon income in the consolidated financial statements, rather than amounts reported on the income tax return.
The Company and its subsidiaries file consolidated federal, combined state income tax, and separate state income tax returns. The provision for income taxes is based upon income in the consolidated financial statements, rather than amounts reported on the income tax return.
During the year ended December 31, 2023, the Company sold mortgage servicing rights related to $318.4 million in loans serviced for third parties.
During the year ended December 31, 2025, the Company had no sales of mortgage servicing rights. During the year ended December 31, 2024, the Company sold mortgage servicing rights related to $233.0 million in loans serviced for third parties in 2024.
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.
Net interest income increased $8.2 million to $56.2 million for the year ended December 31, 2025 compared to $48.0 million for the year ended December 31, 2024.
Refer to Note 1- Summary of Significant Accounting Policies of our consolidated financial statements for a description of recent accounting pronouncements including the respective dates of adoption and effects on results of operations and financial condition. - 43 - Selected Financial Data The summary financial information presented below is derived in part from the Company’s audited financial statements, although the table itself is not audited.
Refer to Note 1- Summary of Significant Accounting Policies of our consolidated financial statements for a description of recent accounting pronouncements including the respective dates of adoption and effects on results of operations and financial condition.
Noninterest income increased $916,000 for the year ended December 31, 2024 due primarily to a $231,000 death benefit received in 2024, earnings on the bank owned life insurance, and loan swap fees. - 46 - Compensation, payroll taxes, and other employee benefits expense increased $819,000 to $20.7 million during the year ended December 31, 2024 primarily due to increased health insurance costs.
Noninterest income increased $395,000 for the year ended December 31, 2025 due primarily to earnings on the bank owned life insurance and loan swap fees. - 42 - Compensation, payroll taxes, and other employee benefits expense increased $236,000 to $20.9 million during the year ended December 31, 2025 primarily due to increased wages and variable compensation.
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.
In addition, at December 31, 2025, we had unfunded commitments under construction loans of $44.6 million, unfunded commitments under business lines of credit of $14.0 million and unfunded commitments under home equity lines of credit and standby letters of credit of $12.3 million.
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 .
Loans held for sale increased $9.1 million, or 6.7%, to $145.1 million at December 31, 2025 from $135.9 million at December 31, 2024 due to a decrease in mortgage rates at the end of the year. - 41 - Loans Receivable .
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.
The detailed discussion in the sections below focuses on the results of operations for the year ended December 31, 2025, compared to the year ended December 31, 2024, and the financial condition as of December 31, 2025 compared to the financial condition as of December 31, 2024.
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.
Net Interest Income Net interest income increased $10.6 million, or 22.9%, to $56.7 million during the year ended December 31, 2025 compared to $46.2 million during the year ended December 31, 2024. • Interest income on loans increased $1.7 million, or 1.6%, to $104.8 million during the year ended December 31, 2025 compared to $103.1 million during the year ended December 31, 2024 due primarily to a 18 basis point increase in average yield on loans as interest rates continued to increase over the past year.
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 year ended December 2024, loan originations net of loan repayments resulted in a negative cash flow $16.7 million. Cash received from the principal repayments of debt and mortgage related securities and maturity and calls of debt securities totaled $36.9 million and $31.0 million for the years ended December 31, 2025 and 2024, 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.
Years Ended December 31, Years Ended December 31, 2025 versus 2024 2024 versus 2023 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) $ (1,672 ) $ 3,359 $ 1,687 $ 4,115 $ 8,803 $ 12,918 Mortgage related securities (3) 130 589 719 (39 ) 482 443 Other interest-earning assets (3)(4) 723 (189 ) 534 (230 ) 816 586 Total interest-earning assets (819 ) 3,759 2,940 3,846 10,101 13,947 Interest expense: Demand accounts (3 ) - (3 ) 9 7 16 Money market and savings accounts 547 523 1,070 (180 ) 1,305 1,125 Certificates of deposit - retail 2,691 (3,644 ) (953 ) 2,415 10,651 13,066 Certificates of deposit - brokered 2,844 (12 ) 2,832 628 - 628 Total interest-bearing deposits 6,079 (3,133 ) 2,946 2,872 11,963 14,835 Borrowings (6,097 ) (4,475 ) (10,572 ) 1,807 1,365 3,172 Total interest-bearing liabilities (18 ) (7,608 ) (7,626 ) 4,679 13,328 18,007 Net change in net interest income $ (801 ) $ 11,367 $ 10,566 $ (833 ) $ (3,227 ) $ (4,060 ) (1) Includes net deferred loan fee amortization income of $565,000, $663,000, and $643,000 for the years ended December 31, 2025, 2024, and 2023, respectively.
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.
During the years ended December 31, 2025, and 2024, we originated on a consolidated basis $2.05 billion and $2.13 billion in loans for sale and sold loans on a consolidated basis of $2.11 billion and $2.24 billion. During the year ended December 2025, loan originations net of loan repayments resulted in a positive cash flow of $5.2 million.
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 increased balance was partially offset by a decrease in yield of 16 basis points. • Interest expense on retail time deposits decreased $953,000, or 2.8%, primarily due to a 39 basis point decrease in average cost of retail time deposits. Partially offsetting this increase was a $50.4 million, or 6.5%, increase in average balance.
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.
This was primarily due to a decrease at the mortgage banking segment in an effort to control costs, as well as a lower overall branch count. • Data processing expense decreased $37,000 or 0.7% to $4.9 million during the year ended December 31, 2025 This was primarily due to decreases at the mortgage banking segment in an effort to control costs, and was offset by continued investments in technology in the community banking segment. • Professional fees decreased $349,000, or 11.0%, to $2.8 million during the year ended December 31, 2025.
The increase was driven by a $175.2 million increase in time deposits and a $10.0 million increase in money market & savings account, offset by an $16.0 million decrease in demand deposits. Of the increase in time deposits, $94.3 million was due to the addition of brokered certificates of deposit.
The increase was driven by a $45.8 million increase in money market & savings accounts, a $27.1 million increase in time deposits, and a $4.5 million increase in demand deposits. Of the increase in time deposits, $16.0 million was due to the increase of brokered certificates of deposit.
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.
The increase in average loan balance was driven by an increase in the average balance of multi-family and commercial real estate loan categories. • Interest income from mortgage related securities increased $719,000, or 16.0%, primarily as the yield increased by 34 basis points. • Interest income from debt securities increased $534,000, or 9.5%, to $6.1 million, due primarily to a $15.3 million increase in average balance.
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 average balance of brokered time deposits for the year ended December 31, 2025 was $84.2 million compared to $15.0 million at December 31, 2024 • Interest expense on money market, savings, and escrow accounts increased $1.1 million, or 18.9%, due primarily to a 17 basis point increase in average cost of money market, savings, and escrow accounts as rates increased to attract new account openings.
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 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. - 46 - Noninterest Expenses Years Ended December 31, 2025 2024 $ Change % Change (Dollars in Thousands) Compensation, payroll taxes, and other employee benefits $ 79,619 $ 81,078 $ (1,459 ) (1.8 %) Occupancy, office furniture, and equipment 7,194 7,573 (379 ) (5.0 %) Advertising 2,877 3,554 (677 ) (19.0 %) Data processing 4,941 4,978 (37 ) (0.7 %) Communications 973 922 51 5.5 % Professional fees 2,835 3,184 (349 ) (11.0 %) Real estate owned (312 ) 26 (338 ) (1,300.0 %) Loan processing expense 2,996 3,090 (94 ) (3.0 %) Other 8,747 7,231 1,516 21.0 % Total noninterest expenses $ 109,870 $ 111,636 $ (1,766 ) (1.6 %) Total noninterest expenses decreased $1.8 million, or 1.6%, to $109.9 million during the year ended December 31, 2025 compared to $111.6 million during the year ended December 31, 2024. • Compensation, payroll taxes and other employee benefit expense at our mortgage banking segment decreased $1.8 million, or 2.9%, to $59.6 million for the year ended December 31, 2025.
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.
Shareholders’ equity increased by $10.3 million, or 3.0%, to $349.4 million at December 31, 2025 from $339.1 million at December 31, 2024. Shareholders' equity increased primarily due to increases in net income and the fair value of the securities portfolio.
Total assets decreased by $3.8 million, or 0.2%, to $2.21 billion at December 31, 2024 from $2.21 billion at December 31, 2023. The decrease in total assets primarily reflects the decrease in loans held for sale, partially offset by increases in loans held for investment, cash surrender value of life insurance, and cash and cash equivalents. Cash and Cash Equivalents.
Total assets increased by $49.9 million, or 2.3%, to $2.26 billion at December 31, 2025 from $2.21 billion at December 31, 2024. The increase in total assets primarily reflects the increase in cash and cash equivalents, loans held for sale, and securities available for sale, partially offset by decreases in loans held for investment and prepaid expenses and other assets.
These assumptions form the basis for our judgments about the carrying values of assets and liabilities that are not readily available from independent, objective sources. We evaluate our estimates on an ongoing basis. Use of alternative assumptions may have resulted in significantly different estimates. Actual results may differ from these estimates.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable and appropriate under current circumstances. These assumptions form the basis for our judgments about the carrying values of assets and liabilities that are not readily available from independent, objective sources. We evaluate our estimates on an ongoing basis.
Accounting policies are an integral part of our financial statements. A thorough understanding of these accounting policies is essential when reviewing our reported results of operations and our financial position. We believe that the critical accounting policies and estimates discussed below involve a heightened level of management judgment due to the complexity, subjectivity and sensitivity involved in their application.
We believe that the critical accounting policies and estimates discussed below involve a heightened level of management judgment due to the complexity, subjectivity and sensitivity involved in their application. See Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements contains a further discussion of our significant accounting policies.
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.
Noninterest Income Years Ended December 31, 2025 2024 $ Change % Change (Dollars in Thousands) Service charges on loans and deposits $ 2,085 $ 2,060 $ 25 1.2 % Increase in cash surrender value of life insurance 2,561 1,969 592 30.1 % Mortgage banking income 79,225 83,565 (4,340 ) (5.2 %) Other 1,316 1,708 (392 ) (23.0 %) Total noninterest income $ 85,187 $ 89,302 $ (4,115 ) (4.6 %) Total noninterest income decreased $4.1 million, or 4.6%, to $85.2 million during the year ended December 31, 2025 compared to $89.3 million during the year ended December 31, 2024. • The decrease in mortgage banking income was primarily the result of a decrease in loan origination volumes and a decrease in gross margin on loans originated.
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.
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.
The mortgage banking segment, which is conducted through Waterstone Mortgage Corporation, consists of originating residential mortgage loans primarily for sale in the secondary market. Our community banking segment generates the significant majority of our consolidated net interest income and requires the significant majority of our provision for credit losses.
Our community banking segment generates the significant majority of our consolidated net interest income and requires the significant majority of our provision for credit losses. Our mortgage banking segment generates the significant majority of our noninterest income and a majority of our noninterest expenses.
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.
There was a negative provision for credit losses of $1.3 million for the year ended December 31, 2025 compared to a negative provision for credit losses of $145,000 for the year ended December 31, 2024.
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.
The increase was due primarily to increases in equipment maintenance and repairs, as well as snow removal expenses. • Advertising expense decreased $677,000, or 19.0%, to $2.9 million during the year ended December 31, 2025.
The increase as partially offset by a decrease of $16.0 million in demand deposits. The increase in deposits was used to fund the increase in loans held for investment and replacing matured borrowings. Borrowings. Total borrowings decreased $164.5 million to $446.5 million at December 31, 2024, from $611.1 million at December 31, 2023.
The increase in deposits was used to fund the increase in loans held for sale, buy available-for-sale securities and replacing matured borrowings. Borrowings. Total borrowings decreased $34.3 million to $412.3 million at December 31, 2025, from $446.5 million at December 31, 2024.
The increase in loan production volume was driven by a $109.4 million, or 128.5%, increase in refinance products due to a decrease in mortgage rates at various points throughout the year. Mortgage purchase products decreased $82.8 million, or 4.1% as housing inventory remained low and interest rates remained relatively high.
The decrease in loan production volume was driven by a decrease in purchase products of $135.0 million, or 7.0%. The decrease in purchase products was partially offset by a $37.0, or 16.4% increase in refinance products due to a decrease in mortgage rates at various points throughout the year.
As a result, changes in market interest rates have a greater impact on performance than do the effects of inflation. - 53 -
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. - 49 -
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.
See Note 7 - Borrowings of the notes to the consolidated financial statements for additional information about the remaining maturities of our FHLB long-term debt. See Note 13 - Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities of the notes to the consolidated financial statements for additional information.
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.
Mortgage purchase products decreased $135.0 million, or 7.0% as housing inventory remained low and affordable housing inventory remains limited. Total mortgage banking noninterest income decreased $4.7 million, or 5.6%, to $79.5 million during the year ended December 31, 2025 compared to $84.3 million during the year ended December 31, 2024.

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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, 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 -
Biggest changeAnalysis of Net Interest Income Sensitivity Immediate Change in Rates +300 +200 +100 -100 (Dollar Amounts in Thousands) As of December 31, 2025 Dollar Change $ (6,152 ) $ (3,499 ) $ (1,916 ) $ (418 ) Percentage Change (9.8 %) (5.6 %) (3.0 %) (0.7 %) At December 31, 2025, a 100 basis point instantaneous increase in interest rates had the effect of decreasing forecast net interest income over the next 12 months by 3.0% while a 100 basis point decrease in rates had the effect of decreasing net interest income by 0.7%. - 50 -
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.
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, 2025 on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments.

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