Wauwatosa, WI – 10/22/2024 – Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $4.7 million, or $0.26 per diluted share, for the quarter ended September 30, 2024, compared to net income of $3.3 million, or $0.16 per diluted share for the quarter ended September 30, 2023. Net income per diluted share was $0.72 for the nine months ended September 30, 2024, compared to net income per diluted share of $0.46 for the nine months ended September 30, 2023.

“The Community Banking segment achieved growth in its loan and core deposit (excluding brokered deposits) balances,” said William Bruss, Chief Executive Officer of Waterstone Financial, Inc. We continue to maintain strong asset quality metrics and remain in a net recovery position, resulting in a negative provision during the quarter. While the decrease in our wholesale borrowing rate during the quarter captures a portion of the benefit from the 50 bps cut in the Federal Funds rate during September, the competitive retail funding environment remains a headwind. The Mortgage Banking segment experienced a decrease in fundings; however, it remained profitable due in large part to our continued focus on cost control. Waterstone Financial, Inc. remained active in share repurchases and once again declared a dividend, as we are committed to shareholder returns."

Highlights of the Quarter Ended September 30, 2024

Waterstone Financial, Inc. (Consolidated)

• Consolidated net income of Waterstone Financial, Inc. totaled $4.7 million for the quarter ended September 30, 2024, compared to net income of $3.3 million for the quarter ended September 30, 2023.
• Consolidated return on average assets was 0.83% for the quarter ended September 30, 2024, compared to 0.58% for the quarter ended September 30, 2023.
• Consolidated return on average equity was 5.55% for the quarter ended September 30, 2024, and 3.63% for the quarter ended September 30, 2023.
• Dividends declared during the quarter ended September 30, 2024, totaled $0.15 per common share.
• During the quarter ended September 30, 2024, we repurchased approximately 71,000 shares at a cost (including the federal excise tax) of $979,000, or $13.75 per share.
• Nonperforming assets as a percentage of total assets was 0.25% at September 30, 2024, 0.25% at June 30, 2024, and 0.20% at September 30, 2023.
• Past due loans as a percentage of total loans was 0.63% at September 30, 2024, 0.76% at June 30, 2024, and 0.53% at September 30, 2023.
• Book value per share was $17.58 at September 30, 2024 and $16.94 at December 31, 2023.

Community Banking Segment

• Pre-tax income totaled $5.6 million for the quarter ended September 30, 2024, which represents a $14,000, or 0.2%, decrease compared to $5.7 million for the quarter ended September 30, 2023.
• Net interest income totaled $12.3 million for the quarter ended September 30, 2024, which represents a $181,000, or 1.5%, decrease compared to $12.4 million for the quarter ended September 30, 2023.
• Average loans held for investment totaled $1.69 billion during the quarter ended September 30, 2024, which represents an increase of $60.9 million, or 3.7%, compared to $1.63 billion for the quarter ended September 30, 2023. The increase was primarily due to increases in the construction, commercial real estate, and over four family mortgages. Average loans held for investment increased $19.7 million compared to $1.67 billion for the quarter ended June 30, 2024. The increase was primarily due to increases in construction and over four family mortgages.
• Net interest margin decreased 13 basis points to 2.13% for the quarter ended September 30, 2024, compared to 2.26% for the quarter ended September 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 increased 12 basis points compared to 2.01% for the quarter ended June 30, 2024, primarily driven by an increase in weighted average yield on loans receivable and held for sale.
• Past due loans at the community banking segment totaled $8.0 million at September 30, 2024, $9.3 million at June 30, 2024, and $6.7 million at September 30, 2023.
• The segment had a negative provision for credit losses related to funded loans of $218,000 for the quarter ended September 30, 2024, compared to a provision for credit losses related to funded loans of $206,000 for the quarter ended September 30, 2023. The current quarter decrease was primarily due to a decrease in historical loss rates, net recoveries for the period, 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 $84,000 for the quarter ended September 30, 2024, compared to a provision for credit losses related to unfunded loan commitments of $239,000 for the quarter ended September 30, 2023. The negative provision for credit losses related to unfunded loan commitments for the quarter ended September 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 60.35% for the quarter ended September 30, 2024, compared to 54.43% for the quarter ended September 30, 2023.
• Average deposits (excluding escrow accounts) totaled $1.25 billion during the quarter ended September 30, 2024, an increase of $47.9 million, or 4.0%, compared to $1.20 billion during the quarter ended September 30, 2023. Average deposits increased $27.6 million, or 9.1% annualized, compared to $1.22 billion for the quarter ended June 30, 2024. The increases were primarily due to an increase in certificates of deposit balances. The segment had $2.0 million in brokered certificate of deposits at September 30, 2024.

Mortgage Banking Segment

• Pre-tax income totaled $144,000 for the quarter ended September 30, 2024, compared to $2.1 million of pre-tax loss for the quarter ended September 30, 2023.
• Loan originations decreased $38.8 million, or 6.5%, to $558.7 million during the quarter ended September 30, 2024, compared to $597.6 million during the quarter ended September 30, 2023. Origination volume relative to purchase activity accounted for 88.9% of originations for the quarter ended September 30, 2024, compared to 95.4% of total originations for the quarter ended September 30, 2023.
• Mortgage banking non-interest income decreased $66,000, or 0.3%, to $21.4 million for the quarter ended September 30, 2024, compared to $21.5 million for the quarter ended September 30, 2023.
• Gross margin on loans sold totaled 3.83% for the quarter ended September 30, 2024, compared to 3.62% for the quarter ended September 30, 2023.
• Total compensation, payroll taxes and other employee benefits decreased $1.3 million, or 7.3%, to $15.9 million during the quarter ended September 30, 2024, compared to $17.2 million during the quarter ended September 30, 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.

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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