Wauwatosa, WI – 7/25/2024 – Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $5.7 million, or $0.31 per diluted share, for the quarter ended June 30, 2024 compared to net income of $4.0 million, or $0.20 per diluted share for the quarter ended June 30, 2023. Net income per diluted share was $0.47 for the six months ended June 30, 2024, compared to net income per diluted share of $0.30 for the six months ended June 30, 2023.

“The results this quarter reflect our continued efforts over the past year to improve efficiencies at the Mortgage Banking segment.” said William Bruss, Chief Executive Officer of Waterstone Financial, Inc. "While our results have improved, we continue to face many challenges within the Mortgage Banking segment, as the mortgage banking industry continues to face unknown variables driven by consumer demand, affordable inventory, and interest rates. The Community Banking segment continues to deal with margin pressure, as short-term funding rates remain elevated due to the restrictive monetary policy of the Federal Reserve. Throughout this challenging period, we have maintained a robust share repurchase program that continues to return strong value to shareholders through repurchase activity that is accretive to book value."

Highlights of the Quarter Ended June 30, 2024

Waterstone Financial, Inc. (Consolidated)

• Consolidated net income of Waterstone Financial, Inc. totaled $5.7 million for the quarter ended June 30, 2024, compared to net income of $4.0 million for the quarter ended June 30, 2023.
• Consolidated return on average assets was 1.02% for the quarter ended June 30, 2024, compared to 0.74% for the quarter ended June 30, 2023.
• Consolidated return on average equity was 6.84% for the quarter ended June 30, 2024, and 4.41% for the quarter ended June 30, 2023.
• Dividends declared during the quarter ended June 30, 2024, totaled $0.15 per common share.
• During the quarter ended June 30, 2024, we repurchased approximately 481,000 shares at a cost (including the federal excise tax) of $5.8 million, or $11.99 per share. This share repurchase activity was accretive to book value per share in the amount of $0.13 during the quarter ended June 30, 2024.
• Nonperforming assets as a percentage of total assets was 0.25% at June 30, 2024, 0.23% at March 31, 2024, and 0.19% at June 30, 2023.
• Past due loans as a percentage of total loans was 0.76% at June 30, 2024, 0.64% at March 31, 2024, and 0.50% at June 30, 2023.
• Book value per share was $17.20 at June 30, 2024 and $16.94 at December 31, 2023.

Community Banking Segment

• Pre-tax income totaled $5.1 million for the quarter ended June 30, 2024, which represents a $1.3 million, or 20.5%, decrease compared to $6.4 million for the quarter ended June 30, 2023.
• Net interest income totaled $11.2 million for the quarter ended June 30, 2024, which represents a $2.0 million, or 15.1%, decrease compared to $13.2 million for the quarter ended June 30, 2023.
• Average loans held for investment totaled $1.67 billion during the quarter ended June 30, 2024, which represents an increase of $81.6 million, or 5.1%, compared to $1.59 billion for the quarter ended June 30, 2023. The increase was primarily due to increases in the construction and commercial real estate mortgages. Average loans held for investment increased $4.1 million compared to $1.66 billion for the quarter ended March 31, 2024. The increase was primarily due to increases in construction and commercial real estate mortgages.
• Net interest margin decreased 46 basis points to 2.01% for the quarter ended June 30, 2024, compared to 2.47% for the quarter ended June 30, 2023, which was a result of an increase in weighted average cost of deposits and borrowings as the federal funds rate increases resulted in increased funding rates. Net interest margin decreased 14 basis points compared to 2.15% for the quarter ended March 31, 2024, driven by an increase in weighted average cost of deposits and borrowings as the short-term borrowing rates increased resulted in increased funding rates.
• Past due loans at the community banking segment totaled $9.3 million at June 30, 2024, $8.1 million at March 31, 2024, and $5.7 million at June 30, 2023.
• The segment had a negative provision for credit losses related to funded loans of $197,000 for the quarter ended June 30, 2024, compared to a provision for credit losses related to funded loans of $619,000 for the quarter ended June 30, 2023. The current quarter decrease was primarily due to decrease to historical loss rates and improvements in certain internal asset quality metrics offset by an adjustment in the qualitative factors primarily related to increases in economic risks related to commercial real estate loans during the quarter. The negative provision for credit losses related to unfunded loan commitments was $82,000 for the quarter ended June 30, 2024, compared to a negative provision for credit losses related to unfunded loan commitments of $462,000 for the quarter ended June 30, 2023. The negative provision for credit losses related to unfunded loan commitments for the quarter ended June 30, 2024, was due primarily to a decrease of loans that are currently waiting to be funded compared to the prior quarter end.
• The efficiency ratio, a non-GAAP ratio, was 62.37% for the quarter ended June 30, 2024, compared to 55.81% for the quarter ended June 30, 2023.
• Average deposits (excluding escrow accounts) totaled $1.22 billion during the quarter ended June 30, 2024, an increase of $35.7 million, or 3.0%, compared to $1.18 billion during the quarter ended June 30, 2023. Average deposits increased $28.8 million, or 9.7% annualized, compared to $1.19 billion for the quarter ended March 31, 2024.

Mortgage Banking Segment

• Pre-tax income totaled $2.0 million for the quarter ended June 30, 2024, compared to $1.4 million of pre-tax loss for the quarter ended June 30, 2023.
• Loan originations increased $10.8 million, or 1.7%, to $634.1 million during the quarter ended June 30, 2024, compared to $623.3 million during the quarter ended June 30, 2023. Origination volume relative to purchase activity accounted for 92.7% of originations for the quarter ended June 30, 2024, compared to 96.4% of total originations for the quarter ended June 30, 2023.
• Mortgage banking non-interest income increased $2.0 million, or 8.9%, to $25.1 million for the quarter ended June 30, 2024, compared to $23.0 million for the quarter ended June 30, 2023.
• Gross margin on loans sold totaled 3.93% for the quarter ended June 30, 2024, compared to 3.73% for the quarter ended June 30, 2023.
• During the quarter ended June 30, 2024, the Company sold mortgage servicing rights related to $233.1 million in loans receivable and with a book value of $2.0 million for $2.1 million resulting in a gain on sale of $152,000. There was no comparable sale during the quarter ended June 30, 2023.
• Total compensation, payroll taxes and other employee benefits decreased $1.0 million, or 5.8%, to $16.9 million during the quarter ended June 30, 2024, compared to $17.9 million during the quarter ended June 30, 2023. The decrease primarily related to decreased salary expense and health insurance expense driven by reduced employee headcount and lower claims.

About Waterstone Financial, Inc.

Waterstone Financial, Inc. is the savings and loan holding company for WaterStone Bank. WaterStone Bank was established in 1921 and offers a full suite of personal and business banking products. The Bank has branches in Wauwatosa/State St, Brookfield, Fox Point/North Shore, Franklin/Hales Corners, Germantown/Menomonee Falls, Greenfield/Loomis Rd, Milwaukee/Oklahoma Ave, Oak Creek/27th St, Oak Creek/Howell Ave, Oconomowoc/Lake Country, Pewaukee, Waukesha, West Allis/Greenfield Ave, and West Allis/National Ave, Wisconsin. WaterStone Bank is the parent company to Waterstone Mortgage, which has the ability to lend in 48 states. For more information about WaterStone Bank, go to http://www.wsbonline.com.

Forward-Looking Statements

This press release contains statements or information that may constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, statements regarding expected financial and operating activities and results that are preceded by, followed by, or that include words such as “may,” “expects,” “anticipates,” “estimates” or “believes.” Any such statements are based upon current expectations that involve a number of risks and uncertainties and are subject to important factors that could cause actual results to differ materially from those anticipated by the forward-looking statements. Factors that might cause such a difference include changes in interest rates; demand for products and services; the degree of competition by traditional and nontraditional competitors; changes in banking regulation or actions by bank regulators; changes in tax laws; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; changes in the national and local economies; and other factors, including risk factors referenced in Item 1A. Risk Factors in Waterstone’s most recent Annual Report on Form 10-K and as may be described from time to time in Waterstone’s subsequent SEC filings, which factors are incorporated herein by reference. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect only Waterstone’s belief as of the date of this press release.

Non-GAAP Financial Measures

Management uses non-GAAP financial information in its analysis of the Company's performance. Management believes that this non-GAAP measure provides a greater understanding of ongoing operations and enhance comparability of results of operations with prior periods. The Company’s management believes that investors may use this non-GAAP measure to analyze the Company's financial performance without the impact of unusual items or events that may obscure trends in the Company’s underlying performance. This non-GAAP data should be considered in addition to results prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP results. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in this measure and that different companies might calculate this measure differently.

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