Waterstone Financial, Inc.

Previous wording

The following discussion and analysis is presented to assist the reader in understanding and evaluating the Company’s financial condition and results of operations. It is intended to complement the unaudited consolidated financial statements, footnotes, and supplemental financial data appearing elsewhere in this Quarterly Report on Form 10-Q and should be read in conjunction therewith. The detailed discussion in the sections below focuses on the results of operations for the three and six months ended June 30, 2025 and 2024 and the financial condition as of June 30, 2025 compared to the financial condition as of December 31, 2024.

Current wording

The following discussion and analysis is presented to assist the reader in understanding and evaluating the Company’s financial condition and results of operations. It is intended to complement the unaudited consolidated financial statements, footnotes, and supplemental financial data appearing elsewhere in this Quarterly Report on Form 10-Q and should be read in conjunction therewith. The detailed discussion in the sections below focuses on the results of operations for the three and nine months ended September 30, 2025 and 2024 and the financial condition as of September 30, 2025 compared to the financial condition as of December 31, 2024.

Previous wording

As described in the notes to the unaudited consolidated financial statements, we have two reportable segments: community banking and mortgage banking. The community banking segment provides consumer and business banking products and services to customers primarily within Southeastern Wisconsin. Consumer products include loan products, deposit products, and personal investment services. Business banking products include loans for working capital, inventory and general corporate use, commercial real estate construction loans, and deposit accounts. The mortgage banking segment, which is conducted by offices in 26 states through Waterstone Mortgage Corporation, consists of originating residential mortgage loans primarily for sale in the secondary market.

Current wording

As described in the notes to the unaudited consolidated financial statements, we have two reportable segments: community banking and mortgage banking. The community banking segment provides consumer and business banking products and services to customers primarily within Southeastern Wisconsin. Consumer products include loan products, deposit products, and personal investment services. Business banking products include loans for working capital, inventory and general corporate use, commercial real estate construction loans, and deposit accounts. The mortgage banking segment, which is conducted by offices in 28 states through Waterstone Mortgage Corporation, consists of originating residential mortgage loans primarily for sale in the secondary market.

Previous wording

Our community banking segment generates the significant majority of our consolidated net interest income and requires the significant majority of our provision for loan losses. 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 three and six months ended June 30, 2025 and 2024, which focuses on noninterest income and noninterest expenses. We have also provided a discussion of the consolidated operations of the Company, which includes the consolidated operations of the Bank and Waterstone Mortgage Corporation, for the same periods.

Current wording

Our community banking segment generates the significant majority of our consolidated net interest income and requires the significant majority of our provision for loan losses. 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 three and nine months ended September 30, 2025 and 2024, which focuses on noninterest income and noninterest expenses. We have also provided a discussion of the consolidated operations of the Company, which includes the consolidated operations of the Bank and Waterstone Mortgage Corporation, for the same periods.

Previous wording

There were no significant items that impacted earnings for the three and six months ended June 30, 2025 and 2024.

Current wording

There were no significant items that impacted earnings for the three and nine months ended September 30, 2025 and 2024.

Previous wording

Net income totaled $6.2 million for the three months ended June 30, 2025 compared to $4.3 million for the three months ended June 30, 2024. Net interest income increased $2.4 million to $13.6 million for the three months ended June 30, 2025 compared to $11.2 million for the three months ended June 30, 2024. Interest expense on borrowings decreased $3.8 million as growth in time deposits allowed us to carry a lower average balance of FHLB advances.

Current wording

Net income totaled $6.9 million for the three months ended September 30, 2025 compared to $4.7 million for the three months ended September 30, 2024. Net interest income increased $2.4 million to $14.6 million for the three months ended September 30, 2025 compared to $12.3 million for the three months ended September 30, 2024. Interest expense on borrowings decreased $3.1 million as growth in time deposits allowed us to carry a lower average balance of FHLB advances.

Previous wording

There was a negative provision for credit losses of $19,000 for the three months ended June 30, 2025 compared to a negative provision for credit losses of $279,000 for the three months ended June 30, 2024. The negative provision for credit losses of $19,000 consisted of a $115,000 negative provision related to loans and $97,000 provision related to unfunded commitments for the three months ended June 30, 2025. The negative provision for credit losses related to funded loans of $125,000 for the quarter ended June 30, 2025 compared to a negative provision for credit losses related to funded loans of $197,000 for the quarter ended June 30, 2024. The current quarter decrease was primarily due to decreases in multifamily qualitative risk factors, offset by an increase in the single-family loan qualitative factors primarily related to increases in internal asset quality risk factors and an increase in construction loan balances. The provision for credit losses related to unfunded loan commitments was $106,000 for the quarter ended June 30, 2025 compared to a negative provision for credit losses related to unfunded loan commitments of $82,000 for the quarter ended June 30, 2024. The provision for credit losses related to unfunded loan commitments for the quarter ended June 30, 2025 was due primarily to an increase in the loans approved that are currently waiting to close compared to the prior quarter end.

Current wording

There was a negative provision for credit losses of $276,000 for the three months ended September 30, 2025 compared to a negative provision for credit losses of $302,000 for the three months ended September 30, 2024. The negative provision for credit losses of $276,000 consisted of a $137,000 negative provision related to loans and $139,000 provision related to unfunded commitments for the three months ended September 30, 2025. The current quarter decrease was primarily due to decreases in single-family and commercial real estate qualitative risk factors, offset by an increase in the multi-family loan balances. The negative provision for credit losses related to unfunded loan commitments was $139,000 for the quarter ended September 30, 2025 compared to a negative provision for credit losses related to unfunded loan commitments of $84,000 for the quarter ended September 30, 2024. The negative provision for credit losses related to unfunded loan commitments for the quarter ended September 30, 2025 was due primarily to a decrease in the construction loans waiting to be funded.

Previous wording

Compensation, payroll taxes, and other employee benefits expense decreased $89,000 to $5.0 million compared to the quarter ending June 30, 2024 primarily due to a decrease in health insurance expense as claims decreased. Other noninterest expense decreased $206,000 to $466,000 as certain loan fees paid to the mortgage banking segment for the purchase of single-family adjustable rate mortgage loans decreased. These fees are eliminated in the consolidated statements of income.

Current wording

Compensation, payroll taxes, and other employee benefits expense decreased $290,000 to $5.0 million compared to the quarter ending September 30, 2024 primarily due to a decrease in health insurance expense as claims decreased.

Previous wording

Net income totaled $1.5 million for the three months ended June 30, 2025 compared to net income of $1.3 million for the three months ended June 30, 2024. We originated $588.8 million in mortgage loans held for sale (including sales to the community banking segment) during the three months ended June 30, 2025, which represents a decrease of $45.3 million, or 7.1%, from the $634.1 million originated during the three months ended June 30, 2024. The decrease in loan production volume was driven by a $47.9 million, or 8.1%, decrease in purchase products and was offset by a $2.6 million increase in refinance products. Total mortgage banking noninterest income decreased $2.4 million, or 9.7%, to $22.6 million during the three months ended June 30, 2025 compared to $25.1 million during the three months ended June 30, 2024. The decrease in mortgage banking noninterest income was related to a 7.1% decrease in volume and a 2.5% decrease in gross margin on loans originated and sold for the three months ended June 30, 2025 compared to June 30, 2024. Gross margin on loans originated and sold is the ratio of mortgage banking income (excluding the change in interest rate lock fair value) divided by total loan originations. We sell loans on both a servicing-released and a servicing-retained basis. Waterstone Mortgage Corporation has contracted with a third party to service the loans for which we retain servicing.

Current wording

Net income totaled $948,000 for the three months ended September 30, 2025 compared to a net loss of $50,000 for the three months ended September 30, 2024. We originated $539.4 million in mortgage loans held for sale (including sales to the community banking segment) during the three months ended September 30, 2025, which represents a decrease of $19.3 million, or 3.5%, from the $558.7 million originated during the three months ended September 30, 2024. The decrease in loan production volume was driven by a $10.7 million, or 2.2%, decrease in purchase products and a $8.6 million decrease in refinance products. Total mortgage banking noninterest income decreased $401,000, or 1.9%, to $21.0 million during the three months ended September 30, 2025 compared to $21.4 million during the three months ended September 30, 2024. The decrease in mortgage banking noninterest income was related to a 3.5% decrease in volume and was partially offset by a 1.1% increase in gross margin on loans originated and sold for the three months ended September 30, 2025 compared to September 30, 2024. Gross margin on loans originated and sold is the ratio of mortgage banking income (excluding the change in interest rate lock fair value) divided by total loan originations. We sell loans on both a servicing-released and a servicing-retained basis. Waterstone Mortgage Corporation has contracted with a third party to service the loans for which we retain servicing.

Previous wording

Additionally, our overall margin can be affected by the mix of both loan type (conventional loans versus governmental) and loan purpose (purchase versus refinance). Conventional loans include loans that conform to Fannie Mae and Freddie Mac standards, whereas governmental loans are those loans guaranteed by the federal government, such as a Federal Housing Authority or U.S. Department of Agriculture loan. Loans originated for the purchase of a residential property comprised 91.7% of total originations during the three months ended June 30, 2025, compared to 92.7% of total originations during the three months ended June 30, 2024, respectively. The mix of loan type trended towards more governmental loans and less conventional loans, with governmental loans and conventional loans comprising 42.4% and 57.6% of all loan originations, respectively, during the three months ended June 30, 2025, compared to 35.4% and 64.6% of all loan originations, respectively, during the three months ended June 30, 2024.

Current wording

Additionally, our overall margin can be affected by the mix of both loan type (conventional loans versus governmental) and loan purpose (purchase versus refinance). Conventional loans include loans that conform to Fannie Mae and Freddie Mac standards, whereas governmental loans are those loans guaranteed by the federal government, such as a Federal Housing Authority or U.S. Department of Agriculture loan. Loans originated for the purchase of a residential property comprised 90.1% of total originations during the three months ended September 30, 2025, compared to 88.9% of total originations during the three months ended September 30, 2024, respectively. The mix of loan type trended towards more governmental loans and less conventional loans, with governmental loans and conventional loans comprising 37.7% and 62.3% of all loan originations, respectively, during the three months ended September 30, 2025, compared to 35.2% and 64.8% of all loan originations, respectively, during the three months ended September 30, 2024.

Previous wording

Total compensation, payroll taxes and other employee benefits decreased $574,000, or 3.4%, to $16.3 million for the three months ended June 30, 2025 compared to $16.9 million for the three months ended June 30, 2024. The decrease primarily related to decreased commission expense due to a decrease in loan origination volumes and salary expense due to reduced employee headcount and a offset by an increase in health insurance expense.

Current wording

Total compensation, payroll taxes and other employee benefits decreased $214,000, or 1.3%, to $15.7 million for the three months ended September 30, 2025 compared to $15.9 million for the three months ended September 30, 2024. The decrease primarily related to decreased commission expense due to a decrease in loan origination volumes and salary expense due to reduced employee headcount and a offset by increases in the annual bonus accrual and sign-on incentives.

Previous wording

Net interest income increased $3.0 million, or 28.4%, to $13.7 million during the three months ended June 30, 2025 compared to $10.7 million during the three months ended June 30, 2024 primarily due to increased yields on our loan and securities portfolios as well as decreased cost of borrowings as a larger portion of our investments were funded by deposits rather than borrowings. Additionally, there was a decrease in borrowing rates compared to the prior year period.

Current wording

Net interest income increased $3.2 million, or 28.0%, to $14.7 million during the three months ended September 30, 2025 compared to $11.5 million during the three months ended September 30, 2024 primarily due to increased yields on our loan and securities portfolios as well as decreased cost of borrowings as a larger portion of our investments were funded by deposits rather than borrowings. Additionally, there was a decrease in borrowing rates compared to the prior year period.

Previous wording

There was a negative provision for credit losses of $9,000 for the three months ended June 30, 2025 compared to a negative $225,000 provision for credit losses for the three months ended June 30, 2024. The $9,000 negative provision for credit losses consisted of a $115,000 negative provision related to loans and a provision related to unfunded commitments of $106,000 for the three months ended June 30, 2025. During the three months ended June 30, 2025, the decrease was primarily due to decreases in multifamily qualitative risk factors, offset by an increase in the single-family loan qualitative factors primarily related to increases in internal asset quality risk factors and an increase in construction loan balances. The increase in provision for unfunded commitments was primarily due to an increase in the loans approved that are currently waiting to close compared to the prior quarter end. 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.

Current wording

There was a negative provision for credit losses of $269,000 for the three months ended September 30, 2025 compared to a negative $377,000 provision for credit losses for the three months ended September 30, 2024. The $269,000 negative provision for credit losses consisted of a $130,000 negative provision related to loans and a provision related to unfunded commitments of $139,000 for the three months ended September 30, 2025. During the three months ended September 30, 2025, the decrease was primarily due to decreases in single-family and commercial real estate qualitative risk factors, offset by an increase in the multi-family loan balances. The negative provision for credit losses related to unfunded loan commitments for the quarter ended September 30, 2025 was due primarily to a decrease in the construction loans waiting to be funded.

Previous wording

Total noninterest expenses decreased $1.9 million, or 6.2%, to $28.4 million during the three months ended June 30, 2025 compared to $30.3 million during the three months ended June 30, 2024.

Current wording

Total noninterest expenses decreased $1.1 million, or 3.8%, to $27.5 million during the three months ended September 30, 2025 compared to $28.6 million during the three months ended September 30, 2024.

Previous wording

Income tax expense totaled $1.9 million for the three months ended June 30, 2025 compared to $1.4 million during the three months ended June 30, 2024. Income tax expense was recognized on the statement of income during the three months ended June 30, 2025 at an effective rate of 20.1% of pretax income compared to the three months ended June 30, 2024 at an effective rate of 20.0% of pretax income.

Current wording

Income tax expense totaled $1.9 million for the three months ended September 30, 2025 compared to $1.2 million during the three months ended September 30, 2024. Income tax expense was recognized on the statement of income during the three months ended September 30, 2025 at an effective rate of 19.5% of pretax income compared to the three months ended September 30, 2024 at an effective rate of 19.7% of pretax income.

Previous wording

Comparison of Community Banking Segment Results of Operations for the Six Months Ended June 30, 2025 and 2024

Current wording

Comparison of Community Banking Segment Results of Operations for the Nine Months Ended September 30, 2025 and 2024

Previous wording

Net income totaled $10.9 million for the six months ended June 30, 2025 compared to $7.0 million for the six months ended June 30, 2024. Net interest income increased $3.2 million to $26.0 million for the six months ended June 30, 2025 compared to $22.8 million for the six months ended June 30, 2024. Interest expense on borrowings decreased $6.8 million as growth in time deposits allowed us to carry a lower average balance of FHLB advances. Interest expense on deposits increased $3.6 million.

Current wording

Net income totaled $17.8 million for the nine months ended September 30, 2025 compared to $11.7 million for the nine months ended September 30, 2024. Net interest income increased $5.6 million to $40.7 million for the nine months ended September 30, 2025 compared to $35.1 million for the nine months ended September 30, 2024. Interest expense on borrowings decreased $10.0 million as growth in time deposits allowed us to carry a lower average balance of FHLB advances along with a decrease in average cost of borrowings as there were fed funds rate cuts over the past year.. Interest expense on deposits increased $3.6 million due primarily to a reduction in time deposit interest rate offerings.

Previous wording

There was a negative provision for credit losses of $537,000 for the six months ended June 30, 2025 compared to a negative provision for credit losses of $174,000 for the six months ended June 30, 2024. The negative provision for credit losses of $537,000 consisted of a $439,000 negative provision related to loans and $98,000 provision related to unfunded commitments for the six months ended June 30, 2025. The current year decrease was primarily due to decreases in historical loss rates, loan portfolio balances, and certain loan qualitative factors primarily in the multi-family category. The provision for credit losses related to unfunded loan commitments was $98,000 for the six months ended June 30, 2025 compared to a negative provision for credit losses related to unfunded loan commitments of $12,000 for the quarter ended June 30, 2024. The negative provision for credit losses related to unfunded loan commitments was primarily due to a decrease in construction loans that are waiting to be funded compared to the prior year end and decrease in historical loss rates and certain qualitative factors.

Current wording

There was a negative provision for credit losses of $813,000 for the nine months ended September 30, 2025 compared to a negative provision for credit losses of $476,000 for the nine months ended September 30, 2024. The negative provision for credit losses of $813,000 consisted of a $575,000 negative provision related to loans and $237,000 provision related to unfunded commitments for the nine months ended September 30, 2025. The current year decrease was primarily due to decreases in historical loss rates, loan portfolio balances, and certain loan qualitative factors primarily in the single-family category. The negative provision for credit losses related to unfunded loan commitments was $237,000 for the nine months ended September 30, 2025 compared to a negative provision for credit losses related to unfunded loan commitments of $96,000 for the nine months ended September 30, 2024. The negative provision for credit losses related to unfunded loan commitments was primarily due to a decrease in construction loans that are waiting to be funded compared to the prior year end and certain qualitative factors.

Previous wording

Compensation, payroll taxes, and other employee benefits expense decreased $237,000 to $10.2 million compared to the quarter ending June 30, 2024 primarily due to a decrease in health insurance expense as claims decreased. Other noninterest expense decreased $301,000 to $1.1 million primarily due to a decrease in certain loan fees paid to the mortgage banking segment for the purchase of single-family adjustable rate mortgage loans decreased. These fees are eliminated in the consolidated statements of income.

Current wording

Compensation, payroll taxes, and other employee benefits expense decreased $527,000 to $15.3 million compared to the quarter ending September 30, 2024 primarily due to a decrease in health insurance expense as claims decreased. Other noninterest expense decreased $286,000 to $1.7 million primarily due to a decrease in certain loan fees paid to the mortgage banking segment for the purchase of single-family adjustable rate mortgage loans decreased. These fees are eliminated in the consolidated statements of income.

Previous wording

Net loss totaled $157,000 for the six months ended June 30, 2025 compared to net income of $1.6 million for the six months ended June 30, 2024. We originated $976.6 million in mortgage loans held for sale (including sales to the community banking segment) during the six months ended June 30, 2025, which represents a decrease of $142.7 million, or 12.7%, from the $1.12 billion originated during the six months ended June 30, 2024. The decrease in loan production volume was driven by a $159.7 million, or 15.4%, decrease in purchase products offset by a $17.1 million increase in refinance products. Total mortgage banking noninterest income decreased $7.0 million, or 15.5%, to $38.4 million during the six months ended June 30, 2025 compared to $45.4 million during the six months ended June 30, 2024. The decrease in mortgage banking noninterest income was related to a 12.7% decrease in volume and a 2.9% decrease in gross margin on loans originated and sold for the six months ended June 30, 2025 compared to June 30, 2024. Gross margin on loans originated and sold is the ratio of mortgage banking income (excluding the change in interest rate lock fair value) divided by total loan originations. The gross margin on loans originated and sold contraction reflects decreased industry demand due to the increased competition from mortgage originators. We sell loans on both a servicing-released and a servicing-retained basis. Waterstone Mortgage Corporation has contracted with a third party to service the loans for which we retain servicing.

Current wording

Net income totaled $791,000 for the nine months ended September 30, 2025 compared to net income of $1.6 million for the nine months ended September 30, 2024. We originated $1.52 billion in mortgage loans held for sale (including sales to the community banking segment) during the nine months ended September 30, 2025, which represents a decrease of $162.0 million, or 9.7%, from the $1.68 billion originated during the nine months ended September 30, 2024. The decrease in loan production volume was driven by a $170.5 million, or 11.1%, decrease in purchase products offset by a $8.5 million increase in refinance products. Total mortgage banking noninterest income decreased $7.4 million, or 11.1%, to $59.4 million during the nine months ended September 30, 2025 compared to $66.8 million during the nine months ended September 30, 2024. The decrease in mortgage banking noninterest income was related to a 9.7% decrease in volume and a 1.6% decrease in gross margin on loans originated and sold for the nine months ended September 30, 2025 compared to September 30, 2024. Gross margin on loans originated and sold is the ratio of mortgage banking income (excluding the change in interest rate lock fair value) divided by total loan originations. The gross margin on loans originated and sold contraction reflects decreased industry demand due to the increased competition from mortgage originators. We sell loans on both a servicing-released and a servicing-retained basis. Waterstone Mortgage Corporation has contracted with a third party to service the loans for which we retain servicing.

Previous wording

Additionally, our overall margin can be affected by the mix of both loan type (conventional loans versus governmental) and loan purpose (purchase versus refinance). Conventional loans include loans that conform to Fannie Mae and Freddie Mac standards, whereas governmental loans are those loans guaranteed by the federal government, such as a Federal Housing Authority or U.S. Department of Agriculture loan. Loans originated for the purchase of a residential property comprised 90.0% of total originations during the six months ended June 30, 2025, compared to 91.8% of total originations during the six months ended June 30, 2024, respectively. The mix of loan type trended towards more governmental loans and less conventional loans, with governmental loans and conventional loans comprising 40.7% and 59.3% of all loan originations, respectively, during the six months ended June 30, 2025, compared to 36.7% and 63.3% of all loan originations, respectively, during the six months ended June 30, 2024.

Current wording

Additionally, our overall margin can be affected by the mix of both loan type (conventional loans versus governmental) and loan purpose (purchase versus refinance). Conventional loans include loans that conform to Fannie Mae and Freddie Mac standards, whereas governmental loans are those loans guaranteed by the federal government, such as a Federal Housing Authority or U.S. Department of Agriculture loan. Loans originated for the purchase of a residential property comprised 90.0% of total originations during the nine months ended September 30, 2025, compared to 90.9% of total originations during the nine months ended September 30, 2024, respectively. The mix of loan type trended towards more governmental loans and less conventional loans, with governmental loans and conventional loans comprising 39.6% and 60.4% of all loan originations, respectively, during the nine months ended September 30, 2025, compared to 36.7% and 63.7% of all loan originations, respectively, during the nine months ended September 30, 2024.

Previous wording

Total compensation, payroll taxes and other employee benefits decreased $3.3 million, or 10.4%, to $28.4 million for the six months ended June 30, 2025 compared to $31.6 million for the six months ended June 30, 2024. The decrease primarily related to decreased commission expense, branch manager pay, salary expense, and sign-on incentives driven by reduced employee headcount and a decrease in loan origination volumes and branch profitability.

Current wording

Total compensation, payroll taxes and other employee benefits decreased $3.5 million, or 7.3%, to $44.1 million for the nine months ended September 30, 2025 compared to $47.6 million for the nine months ended September 30, 2024. The decrease primarily related to decreased commission expense, branch manager pay, and salary expense driven by reduced employee headcount and a decrease in loan origination volumes and branch profitability.

Previous wording

Professional fees increased $587,000, or 54.5% , to $1.7 million for the six months ended June 30, 2025, compared to $1.1 million for the six months ended June 30, 2024. The increase was primarily related to legal services and the finalization of a settlement related to a previously disclosed legal matter during the six months ended June 30, 2025 . The Company maintained a $1.3 million accrual related to this legal matter as of December 31, 2024.

Current wording

Professional fees increased $388,000, or 26.4%, to $1.9 million for the nine months ended September 30, 2025, compared to $1.5 million for the nine months ended September 30, 2024. The increase was primarily related to legal services and the finalization of a settlement related to a previously disclosed legal matter during the nine months ended September 30, 2025 . The Company maintained a $1.3 million accrual related to this legal matter as of December 31, 2024.

Previous wording

Net interest income increased $4.5 million, or 20.5%, to $26.3 million during the six months ended June 30, 2025 compared to $21.8 million during the six months ended June 30, 2024 primarily due to increased yields on our loan and securities portfolios as well as decreased cost of borrowings as a larger portion of our investments were funded by deposits rather than borrowings. Additionally, there was a decrease in borrowing rates compared to the prior year period.

Current wording

Net interest income increased $7.7 million, or 23.1%, to $41.0 million during the nine months ended September 30, 2025 compared to $33.3 million during the nine months ended September 30, 2024 primarily due to increased yields on our loan and securities portfolios as well as decreased cost of borrowings as a larger portion of our investments were funded by deposits rather than borrowings. Additionally, there was a decrease in borrowing rates compared to the prior year period.

Previous wording

There was a negative provision for credit losses of $567,000 for the six months ended June 30, 2025 compared to a negative provision for credit losses of $158,000 for the six months ended June 30, 2024. The $567,000 negative provision for credit losses consisted of a $469,000 negative provision related to loans and a negative provision related to unfunded commitments of $98,000 for the six months ended June 30, 2025. During the six months ended June 30, 2025, the decrease was primarily due to decreases in multifamily qualitative risk factors, offset by an increase in commercial real estate qualitative factors primarily related to increases in internal asset quality risk factors. The decrease in provision for unfunded commitments was primarily due to a decrease in historical loss and qualitative factors in certain loan categories. 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.

Current wording

There was a negative provision for credit losses of $836,000 for the nine months ended September 30, 2025 compared to a negative provision for credit losses of $535,000 for the nine months ended September 30, 2024. The $836,000 negative provision for credit losses consisted of a $599,000 negative provision related to loans and a negative provision related to unfunded commitments of $237,000 for the nine months ended September 30, 2025. During the nine months ended September 30, 2025, the decrease was primarily due to decreases in single-family qualitative risk factors. The decrease in provision for unfunded commitments was primarily due to a decrease in historical loss and qualitative factors in certain loan categories. 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.

Previous wording

Total noninterest expenses decreased $3.1 million, or 5.3%, to $54.7 million during the six months ended June 30, 2025 compared to $57.8 million during the six months ended June 30, 2024.

Current wording

Total noninterest expenses decreased $4.2 million, or 4.8%, to $82.2 million during the nine months ended September 30, 2025 compared to $86.4 million during the nine months ended September 30, 2024.

Previous wording

Income tax expense totaled $2.8 million for the six months ended June 30, 2025 compared to $3.2 million during the six months ended June 30, 2024. Income tax expense was recognized on the statement of income during the six months ended June 30, 2025 at an effective rate of 20.6% of pretax income and during the six months ended June 30, 2024 at an effective rate of 26.5% of pretax income. The decrease was primarily due to the 2024 Wisconsin tax law enacted which resulted in no Wisconsin state income taxes being expensed in future years, resulting in a lower estimated effective tax rate. The elimination of Wisconsin state income tax expense resulted in the establishment of a valuation allowance for 2024 Wisconsin state income deferred tax assets, resulting in a one-time $1.1 million charge to state income tax expense in the first quarter.

Current wording

Income tax expense totaled $4.7 million for the nine months ended September 30, 2025 compared to $4.3 million during the nine months ended September 30, 2024. Income tax expense was recognized on the statement of income during the nine months ended September 30, 2025 at an effective rate of 20.1% of pretax income and during the nine months ended September 30, 2024 at an effective rate of 24.3% of pretax income. The decrease was primarily due to the 2024 Wisconsin tax law enacted which resulted in no Wisconsin state income taxes being expensed in future years, resulting in a lower estimated effective tax rate. The elimination of Wisconsin state income tax expense resulted in the establishment of a valuation allowance for 2024 Wisconsin state income deferred tax assets, resulting in a one-time $1.1 million charge to state income tax expense in the first quarter of 2024.

Previous wording

Total Assets** – **Total assets increased by $47.0 million, or 2.1%, to $2.26 billion at June 30, 2025 from $2.21 billion at December 31, 2024. The increase in total assets primarily reflects an increase in cash and cash equivalents, loans held for sale, and securities available for sale funded through an increase in deposits and borrowings.

Current wording

Total Assets** – **Total assets increased by $59.6 million, or 2.7%, to $2.27 billion at September 30, 2025 from $2.21 billion at December 31, 2024. The increase in total assets primarily reflects an increase in cash and cash equivalents, loans held for investment, and securities available for sale funded through an increase in deposits, borrowings, and advance payments by borrowers for taxes.

Previous wording

Cash and Cash Equivalents** – **Cash and cash equivalents increased $31.2 million, or 78.4%, to $70.9 million at June 30, 2025, compared to $39.8 million at December 31, 2024. The increase in cash and cash equivalents primarily reflects the increase of funding sources from deposits, borrowings, and advance payments by borrowers for taxes.

Current wording

Cash and Cash Equivalents** – **Cash and cash equivalents increased $14.0 million, or 35.2%, to $53.8 million at September 30, 2025, compared to $39.8 million at December 31, 2024. The increase in cash and cash equivalents primarily reflects the increase of funding sources from deposits, borrowings, and advance payments by borrowers for taxes.

Previous wording

Securities Available for Sale – Securities available for sale increased $10.2 million to $218.8 million at June 30, 2025. The increase was primarily due to the purchases of securities exceeding paydowns and maturities and an increase in fair value as longer term interest rates decreased compared to the prior year period.

Current wording

Securities Available for Sale – Securities available for sale increased $17.9 million to $226.4 million at September 30, 2025. The increase was primarily due to the purchases of securities exceeding paydowns and maturities and an increase in fair value as longer term interest rates decreased compared to the prior year period.

Previous wording

Loans Held for Sale - Loans held for sale increased $25.9 million to $161.8 million at June 30, 2025 due to an increase primarily due to seasonal demand in the summer months.

Current wording

Loans Held for Sale - Loans held for sale decreased $233,000 to $135.7 million at September 30, 2025 due to a decrease primarily due to seasonal slowdown as year end approaches.

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Loans Receivable - Loans receivable held for investment decreased $16.3 million to $1.66 billion at June 30, 2025. The decrease in total loans receivable was primarily attributable to decreases in each of the one-to-four family, multi-family, commercial loan categories offset by increases in the commercial real estate and construction loan categories.

Current wording

Loans Receivable - Loans receivable held for investment increased $34.3 million to $1.71 billion at September 30, 2025. The increase in total loans receivable was primarily attributable to increases in each of the multi-family, commercial real estate, and construction loan categories offset by a decrease in the one-to-four family loan category.

Previous wording

Allowance for Credit Losses - Loans** -** The allowance for credit losses decreased to $17.8 million at June 30, 2025. There was a $469,000 negative provision for credit losses - loans for the six months ended June 30, 2025. The negative provision for credit losses related to loans decreased primarily due to a decrease in historical losses used in the calculation, decrease in loan balance, and decreases in certain qualitative factors. See Note 3 - Loans Receivable of the notes to unaudited consolidated financial statements for further discussion on the allowance for credit losses. Additionally, net recoveries totaled $22,000 for the six months ended June 30, 2025.

Current wording

Allowance for Credit Losses - Loans** -** The allowance for credit losses decreased to $17.7 million at September 30, 2025. There was a $599,000 negative provision for credit losses - loans for the nine months ended September 30, 2025. The negative provision for credit losses related to loans decreased primarily due to a decrease in historical losses used in the calculation and decreases in certain qualitative factors. See Note 3 - Loans Receivable of the notes to unaudited consolidated financial statements for further discussion on the allowance for credit losses. Additionally, net recoveries totaled $22,000 for the nine months ended September 30, 2025.

Previous wording

Prepaid expenses and other assets – Total prepaid expenses and other assets decreased $5.3 million to $43.0 million at June 30, 2025. The decrease was primarily due to decreases in back-to-back loan swap fair value adjustment and the deferred tax asset for unrealized losses as long term interest rates decreased.

Current wording

Prepaid expenses and other assets – Total prepaid expenses and other assets decreased $8.4 million to $39.8 million at September 30, 2025. The decrease was primarily due to decreases in back-to-back loan swap fair value adjustment and the deferred tax asset for unrealized losses as long term interest rates decreased.

Previous wording

Deposits – Total deposits increased $24.8 million to $1.38 billion at June 30, 2025. The increase was driven by increases of $3.4 million in demand deposits and $37.6 million in money market and savings deposits offset by a decrease of $16.2 million in time deposits.

Current wording

Deposits – Total deposits increased $26.1 million to $1.39 billion at September 30, 2025. The increase was driven by increases of $5.5 million in demand deposits and $23.5 million in money market and savings deposits offset by a decrease of $2.9 million in time deposits.

Previous wording

Borrowings – Total borrowings increased $19.2 million, or 4.3%, to $465.7 million at June 30, 2025. The community banking segment increased its FHLB long-term borrowings by $100.0 million, decreased its short-term FHLB borrowings by $51.4 million, and paid off $40.0 million in long-term FHLB borrowings. External short-term borrowings at the mortgage banking segment increased a total of $10.6 million at June 30, 2025 from December 31, 2024.

Current wording

Borrowings – Total borrowings increased $22.5 million, or 5.0%, to $469.1 million at September 30, 2025. The community banking segment increased its FHLB long-term borrowings by $100.0 million, decreased its short-term FHLB borrowings by $43.4 million, and paid off $40.0 million in long-term FHLB borrowings. External short-term borrowings at the mortgage banking segment increased a total of $5.9 million at September 30, 2025 from December 31, 2024.

Previous wording

Advance Payments by Borrowers for Taxes - Advance payments by borrowers for taxes increased $15.5 million to $21.1 million at June 30, 2025. The increase was the result of payments received from borrowers for their real estate taxes and is seasonally normal, as balances increase during the course of the calendar year until real estate tax obligations are paid in the fourth quarter.

Current wording

Advance Payments by Borrowers for Taxes - Advance payments by borrowers for taxes increased $21.4 million to $27.0 million at September 30, 2025. The increase was the result of payments received from borrowers for their real estate taxes and is seasonally normal, as balances increase during the course of the calendar year until real estate tax obligations are paid in the fourth quarter.

Previous wording

Other Liabilities - Other liabilities decreased $14.9 million to $43.6 million at June 30, 2025. Other liabilities decreased primarily due to a seasonal decrease in outstanding checks related to advance payments by borrowers for taxes. The Company receives payments from borrowers for their real estate taxes during the course of the calendar year until real estate tax obligations are paid in the fourth quarter. At the time at which the disbursements are made, the outstanding checks are classified as other liabilities in the statements of financial condition, and these amounts remain classified as other liabilities until settled. The decrease was also due to decrease in back-to-back loan swap fair value adjustment as long-term interest rates decreased.

Current wording

Other Liabilities - Other liabilities decreased $16.8 million to $41.6 million at September 30, 2025. Other liabilities decreased primarily due to a seasonal decrease in outstanding checks related to advance payments by borrowers for taxes. The Company receives payments from borrowers for their real estate taxes during the course of the calendar year until real estate tax obligations are paid in the fourth quarter. At the time at which the disbursements are made, the outstanding checks are classified as other liabilities in the statements of financial condition, and these amounts remain classified as other liabilities until settled. The decrease was also due to decrease in back-to-back loan swap fair value adjustment as long-term interest rates decreased.

Previous wording

Shareholders’** Equity** – Shareholders' equity increased $2.4 million to $341.5 million at June 30, 2025. Shareholders' equity increased primarily due an increase in the fair value of the securities portfolio.

Current wording

Shareholders’** Equity** – Shareholders' equity increased $6.4 million to $345.5 million at September 30, 2025. Shareholders' equity increased primarily due increases in net income and the fair value of the securities portfolio.

Previous wording

Total non-accrual loans increased by $2.5 million, or 44.7%, to $8.2 million as of June 30, 2025 compared to $5.7 million as of December 31, 2024. The ratio of non-accrual loans to total loans receivable was 0.49% at June 30, 2025 and 0.34% at December 31, 2024. During the six months ended June 30, 2025, $3.6 million in loans were placed on non-accrual status. Offsetting this activity, $983,000 in loans returned to accrual status and $64,000 in principal payments were received during the six months ended June 30, 2025.

Current wording

Total non-accrual loans increased by $331,000, or 5.8%, to $6.0 million as of September 30, 2025 compared to $5.7 million as of December 31, 2024. The ratio of non-accrual loans to total loans receivable was 0.35% at September 30, 2025 and 0.34% at December 31, 2024. During the nine months ended September 30, 2025, $3.6 million in loans were placed on non-accrual status. Offsetting this activity, $2.1 million in loans returned to accrual status and $1.2 million in principal payments were received during the nine months ended September 30, 2025.

Previous wording

Of the $8.2 million in total non-accrual loans as of June 30, 2025, $5.3 million in loans have been specifically reviewed to assess whether a specific valuation allowance is necessary. A specific valuation allowance is established for an amount equal to the impairment when the carrying value of the loan exceeds the present value of expected future cash flows, discounted at the loan's original effective interest rate or the fair value of the underlying collateral with an adjustment made for costs to dispose of the asset. Based upon these specific reviews, no charge-offs have been recorded over the life of these loans and there were no specific reserves as of June 30, 2025. The remaining $2.4 million of non-accrual loans were reviewed on an aggregate basis as of June 30, 2025.

Current wording

Of the $6.0 million in total non-accrual loans as of September 30, 2025, $4.3 million in loans have been specifically reviewed to assess whether a specific valuation allowance is necessary. A specific valuation allowance is established for an amount equal to the impairment when the carrying value of the loan exceeds the present value of expected future cash flows, discounted at the loan's original effective interest rate or the fair value of the underlying collateral with an adjustment made for costs to dispose of the asset. Based upon these specific reviews, no charge-offs have been recorded over the life of these loans and there were no specific reserves as of September 30, 2025. The remaining $1.7 million of non-accrual loans were reviewed on an aggregate basis as of September 30, 2025.