Waterstone Financial (WSBF -0.73%), a Wisconsin-based bank holding company with major community banking and mortgage banking operations, posted its second-quarter earnings results on July 22, 2025, for the period ended June 30. Earnings per share increased 38.7% year-over-year to $0.43 (GAAP), its highest quarterly EPS since 2021. Net income (GAAP) increased 35.1% to $7.7 million compared to Q2 2024. Return on average equity rose to 9.04%. There were no analyst estimates available for direct comparison. Improved margins and loan yields, solid deposit growth, and tighter cost control contributed to the favorable results. Despite declines in mortgage banking revenues and originations, the quarter marked progress in profitability and operational efficiency.
| Metric | Q2 2025 | Q2 2024 | Y/Y Change |
|---|---|---|---|
| EPS | $0.43 | $0.31 | 38.7% |
| Net income | $7.7 million | $5.7 million | 35% |
| Net Interest Margin | 2.6% | 2.01% | 0.59 pp |
| Return on Average Equity | 9.04% | 6.84% | 2.20 pp |
| Efficiency Ratio – Community Banking | 50.4% | 62.37% | (-11.97 pp) |
Company Overview and Key Success Factors
Waterstone Financial operates as a community-focused financial institution. Its core businesses are community banking—providing loans, deposit services, and other traditional banking products—and mortgage banking, which originates and sells residential real estate loans through the Waterstone Mortgage subsidiary. Most of its lending portfolio is concentrated in residential, multi-family, and commercial real estate loans.
Recent efforts have focused on bolstering margins, expanding core deposits, and carefully managing credit risk as economic conditions evolve. Regulatory compliance and capital strength are key, alongside operational efficiency measures and strategic adjustments to mortgage operations amid lower industry origination volumes. Market position relies on disciplined cost control, competitive banking products, and closely monitored risk exposure to the real estate sector.
Quarterly Highlights: Financial Performance and Business Developments
The second quarter saw a sharp rise in profitability, aided by higher interest income and efforts to improve funding costs. Net interest margin increased to 2.60% for the quarter ended June 30, 2025, compared to 2.01% a year earlier. The company attributed this improvement to higher loan yields and a reduction in both the cost of deposits and borrowings. Return on average equity (annualized) increased to 9.04% for the quarter ended June 30, 2025, compared to 6.84% a year earlier. Return on average assets (GAAP) reached 1.39%.
Community Banking, the segment focused on local lending and deposits, reported substantial gains in efficiency and profitability. Its pre-tax income rose 50.4% year-over-year, as costs declined. The non-GAAP efficiency ratio for Community Banking improved notably, moving from 62.37% in Q2 2024 to 50.40%. Net interest income for the segment was up 21.4% year over year.
The Mortgage Banking segment, which centers around the origination and sale of residential and multi-family mortgages, faced volume and margin pressures. Loan originations dropped 7.1% compared to Q2 2024, totaling $588.8 million. Non-interest income in mortgage banking—a figure that captures net gains on loan sales and fees—declined by 9.7%. Gross margin on loans sold slipped to 3.84% from 3.93% compared to Q2 2024, indicating tightening profitability on mortgage products. The company held compensation expenses in check for mortgage operations, which helped support segment profitability despite revenue declines.
There were no material one-time events disclosed in the quarter. The company continued its share repurchase activity, buying back 508,000 shares at an average cost of $12.80 per share. These repurchases increased book value per share by $0.14. The quarterly dividend stayed at $0.15 per share, unchanged from the prior-year period.
Asset Quality and Balance Sheet Trends
Asset quality remained broadly stable but showed some signs of slippage. The ratio of nonperforming assets—loans or properties that are not producing income—to total assets increased to 0.37%, up from 0.25% one year earlier, as of June 30, 2025, based on reported figures. Past due loans as a share of total loans decreased to 0.69% as of June 30, 2025, from 0.76% as of June 30, 2024. Management continued to release reserves from its allowance for credit losses, booking a small negative provision of $9,000. The allowance for credit losses (GAAP) dipped slightly to 1.07% of total loans receivable, down from 1.1% for Q2 2024.
Core deposit growth was a notable strength, with average core retail deposits up 7.5% year over year to $1.31 billion. The balance sheet saw increases in cash and securities, with total assets reaching $2.26 billion as of June 30, 2025. Book value per share climbed to $18.19, and total shareholders’ equity reached $341.5 million as of June 30, 2025.
Management Outlook and What to Watch
Management did not issue specific financial guidance for the remainder of fiscal 2025 or the next quarter. The company reiterated its focus on steady asset quality, operational efficiency, and shareholder returns through dividends and share repurchases. Forward-looking comments highlighted ongoing risks in the real estate and mortgage markets, as well as the importance of deposit and margin management in a competitive landscape.
For investors following Waterstone Financial, key areas to watch in the coming periods include trends in deposit gathering, loan origination volumes, and net interest margins. Asset quality metrics, especially nonperforming assets and reserve levels, will also be important signals for underlying risk in a shifting economic environment. The quarterly dividend was unchanged at $0.15 per share.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
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