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 months ended March 31, 2026 and 2025 and the financial condition as of March 31, 2026 compared to the financial condition as of December 31, 2025.

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 six months ended June 30, 2026 and 2025 and the financial condition as of June 30, 2026 compared to the financial condition as of December 31, 2025.

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 28 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 24 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 months ended March 31, 2026 and 2025, 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 six months ended June 30, 2026 and 2025, 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 months ended March 31, 2026 and 2025.

Current wording

There were no significant items that impacted earnings for the three and six months ended June 30, 2026 and 2025.

Previous wording

Net income totaled $6.0 million for the three months ended March 31, 2026 compared to $4.6 million for the three months ended March 31, 2025. Net interest income increased $2.8 million to $15.2 million for the three months ended March 31, 2026 compared to $12.4 million for the three months ended March 31, 2025. Interest expense on borrowings decreased $742,000 as growth in time deposits allowed us to carry a lower average balance of FHLB advances and interest expense on deposits decreased as accounts repriced at a lower rate and transitioned to more money market accounts.

Current wording

Net income totaled $7.3 million for the three months ended June 30, 2026 compared to $6.2 million for the three months ended June 30, 2025. Net interest income increased $2.2 million to $15.8 million for the three months ended June 30, 2026 compared to $13.6 million for the three months ended June 30, 2025. Interest expense on borrowings decreased $566,000 as growth in time deposits allowed us to carry a lower average balance of FHLB advances and interest expense on deposits decreased $932,000 as accounts repriced at a lower rate and transitioned to more money market accounts.

Previous wording

There was a provision for credit losses of $284,000 for the three months ended March 31, 2026 compared to a negative provision for credit losses of $518,000 for the three months ended March 31, 2025. The provision for credit losses of $284,000 consisted of a $240,000 provision related to loans and $44,000 provision related to unfunded commitments for the three months ended March 31, 2026. The current quarter increase was primarily due to increases in multi-family and construction loan balances along with an increase in multifamily external qualitative factors. The provision for credit losses related to unfunded loan commitments for the quarter ended March 31, 2026 was due primarily to an increase in the loan pipeline balance at quarter end.

Current wording

There was a provision for credit losses of $248,000 for the three months ended June 30, 2026 compared to a negative provision for credit losses of $19,000 for the three months ended June 30, 2025. The provision for credit losses of $248,000 consisted of a $171,000 provision related to loans and $77,000 provision related to unfunded commitments for the three months ended June 30, 2026. The current quarter increase was primarily due to increases in commercial real estate external qualitative factors. The provision for credit losses related to unfunded loan commitments for the quarter ended June 30, 2026 was due primarily to an increase of business and commercial real estate loans in the loan pipeline balance at quarter end.

Previous wording

Net interest income increased $2.9 million, or 23.0%, to $15.5 million during the three months ended March 31, 2026 compared to $12.6 million during the three months ended March 31, 2025 primarily due to increased yields on our loan and securities portfolios as well as decreased cost of deposits and borrowings as replacement rates decreased compared to the prior year period.

Current wording

Net interest income increased $2.3 million, or 16.8%, to $16.0 million during the three months ended June 30, 2026 compared to $13.7 million during the three months ended June 30, 2025 primarily due to increased yields on our loan and securities portfolios as well as decreased cost of deposits and borrowings as replacement rates decreased compared to the prior year period.

Previous wording

There was a provision for credit losses of $264,000 for the three months ended March 31, 2026 compared to a negative $558,000 provision for credit losses for the three months ended March 31, 2025. The $264,000 provision for credit losses consisted of a $220,000 provision related to loans and a provision related to unfunded commitments of $44,000 for the three months ended March 31, 2026. During the three months ended March 31, 2026, the increase was primarily due to increases in multi-family and construction loan balances along with an increase in multifamily external qualitative factors. The provision for credit losses related to unfunded loan commitments for the quarter ended March 31, 2026 was due primarily to an increase in the loan pipeline balance at quarter end.

Current wording

There was a provision for credit losses of $236,000 for the three months ended June 30, 2026 compared to a negative $9,000 provision for credit losses for the three months ended June 30, 2025. The $236,000 provision for credit losses consisted of a $159,000 provision related to loans and a provision related to unfunded commitments of $77,000 for the three months ended June 30, 2026. During the three months ended June 30, 2026, the increase was primarily due to increases in commercial real estate external qualitative factors. The provision for credit losses related to unfunded loan commitments for the quarter ended June 30, 2026 was due primarily to an increase of business and commercial real estate loans in the loan pipeline balance at quarter end.

Previous wording

Total noninterest expenses increased $1.5 million, or 5.8%, to $27.9 million during the three months ended March 31, 2026 compared to $26.4 million during the three months ended March 31, 2025.

Current wording

Total noninterest expenses increased $1.0 million, or 3.5%, to $29.4 million during the three months ended June 30, 2026 compared to $28.4 million during the three months ended June 30, 2025.

Previous wording

Income tax expense totaled $1.6 million for the three months ended March 31, 2026 compared to $845,000 during the three months ended March 31, 2025. The increase was primarily due to the increase in pre-tax income. Income tax expense was recognized on the statement of income during the three months ended March 31, 2026 at an effective rate of 20.6% of pretax income compared to the three months ended March 31, 2025 at an effective rate of 21.8% of pretax income.

Current wording

Income tax expense totaled $2.2 million for the three months ended June 30, 2026 compared to $1.9 million during the three months ended June 30, 2025. The increase was primarily due to the increase in pre-tax income. Income tax expense was recognized on the statement of income during the three months ended June 30, 2026 at an effective rate of 20.4% of pretax income compared to the three months ended June 30, 2025 at an effective rate of 20.1% of pretax income.

Previous wording

Compensation, payroll taxes, and other employee benefits expense increased $363,000 to $5.6 million compared to the quarter ending March 31, 2025 primarily due to increases in health insurance, variable compensation, restricted stock expense due to new directors and executive grants, and ESOP compensation as average share price has risen year-over-year.

Current wording

Compensation, payroll taxes, and other employee benefits expense increased $948,000 to $11.2 million for the six months ended June 30, 2026 compared to $10.2 million for the six months ended June 30, 2025. primarily due to increases in health insurance, salary expense from annual raises, variable compensation, restricted stock expense due to new directors and executive grants, and ESOP compensation as average share price has risen year-over-year.

Previous wording

Net income totaled $12,000 for the three months ended March 31, 2026 compared to a net loss of $1.6 million for the three months ended March 31, 2025. We originated $508.3 million in mortgage loans held for sale (including sales to the community banking segment) during the three months ended March 31, 2026, which represents an increase of $120.6 million, or 31.1%, from the $387.7 million originated during the three months ended March 31, 2025. The increase in loan production volume was driven by a $36.4 million, or 10.7%, increase in purchase products and a $84.2 million, or 173.7%, increase in refinance products. Total mortgage banking noninterest income increased $3.4 million, or 21.5%, to $19.1 million during the three months ended March 31, 2026 compared to $15.7 million during the three months ended March 31, 2025. The increase in mortgage banking noninterest income was related to a 31.1% increase in volume and was partially offset by a 8.3% decrease in gross margin on loans originated and sold for the three months ended March 31, 2026 compared to March 31, 2025. 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 $1.2 million for the six months ended June 30, 2026 compared to a net loss of $157,000 for the six months ended June 30, 2025. We originated $1.13 billion in mortgage loans held for sale (including sales to the community banking segment) during the six months ended June 30, 2026, which represents an increase of $153.6 million, or 15.7%, from the $976.6 million originated during the six months ended June 30, 2025. The increase in loan production volume was driven by a $47.3 million, or 5.4%, increase in purchase products and a $106.2 million, or 106.3%, increase in refinance products. Loans originated for the purchase of a residential property comprised 82.0% of total originations during the six months ended June 30, 2026, compared to 90.0% of total originations during the six months ended June 30, 2025, respectively. Total mortgage banking noninterest income increased $3.1 million, or 8.1%, to $41.5 million during the six months ended June 30, 2026 compared to $38.4 million during the six months ended June 30, 2025. The increase in mortgage banking noninterest income was related to a 15.7% increase in volume and was partially offset by a 7.0% decrease in gross margin on loans originated and sold for the six months ended June 30, 2026 compared to June 30, 2025. 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

Total compensation, payroll taxes and other employee benefits increased $2.4 million, or 20.1%, to $14.5 million for the three months ended March 31, 2026 compared to $12.1 million for the three months ended March 31, 2025. The increase primarily related to increased commission expense due to an increase in fundings, manager pay expense as profitability improved, production incentive expense, and salary expense.

Current wording

Total compensation, payroll taxes and other employee benefits increased $2.7 million, or 9.4%, to $31.0 million for the six months ended June 30, 2026 compared to $28.4 million for the six months ended June 30, 2025. The increase primarily related to increased commission expense due to an increase in fundings, manager pay expense as profitability improved, production incentive expense, and salary expense offset by a decrease in health insurance expense.

Previous wording

Total noninterest income increased $3.1 million or 18.3%, to $20.2 million during the three months ended March 31, 2026 compared to $17.1 million during the three months ended March 31, 2025.

Current wording

Total noninterest income increased $3.0 million or 7.3%, to $44.5 million during the three months ended June 30, 2026 compared to $41.4 million during the three months ended June 30, 2025.

Previous wording

Total Assets** – **Total assets decreased by $8.3 million, or 0.4%, to $2.25 billion at March 31, 2026 from $2.26 billion at December 31, 2025. The decrease in total assets primarily reflects a decrease in cash and cash equivalents, partially offset by increases in loans receivable and securities available for sale.

Current wording

Total Assets** – **Total assets decreased by $6.7 million, or 0.3%, to $2.25 billion at June 30, 2026 from $2.26 billion at December 31, 2025. The decrease in total assets primarily reflects a decrease in cash and cash equivalents, partially offset by increases in loans receivable, loans held for sale, and securities available for sale.

Previous wording

Cash and Cash Equivalents** – **Cash and cash equivalents decreased $26.5 million, or 37.2%, to $44.7 million at March 31, 2026, compared to $71.1 million at December 31, 2025. The decrease in cash and cash equivalents primarily reflects the increase in loans receivable and securities available for sale.

Current wording

Cash and Cash Equivalents** – **Cash and cash equivalents decreased $32.9 million, or 46.3%, to $38.2 million at June 30, 2026, compared to $71.1 million at December 31, 2025. The decrease in cash and cash equivalents primarily reflects the increase in loans receivable, loans held for sale, and securities available for sale along with the decrease in deposits.

Previous wording

Securities Available for Sale – Securities available for sale increased $6.2 million to $237.0 million at March 31, 2026. The increase was primarily due to the purchases of securities exceeding paydowns and maturities offset by a decrease in fair value as longer term interest rates increased compared to prior year end.

Current wording

Securities Available for Sale – Securities available for sale increased $6.5 million to $237.3 million at June 30, 2026. The increase was primarily due to the purchases of securities exceeding paydowns and maturities offset by a decrease in fair value as longer term interest rates increased compared to prior year end.

Previous wording

Loans Held for Sale - Loans held for sale decreased $707,000 to $144.4 million at March 31, 2026.

Current wording

Loans Held for Sale - Loans held for sale increased $6.6 to $151.7 million at June 30, 2026 as seasonal house buying activity increased.

Previous wording

Loans Receivable - Loans receivable held for investment increased $8.8 million to $1.68 billion at March 31, 2026. The increase in total loans receivable was primarily attributable to increases in each of the multi-family, commercial real estate, construction, and commercial loan categories offset by a decrease in the one-to-four family loan category.

Current wording

Loans Receivable - Loans receivable held for investment increased $8.3 million to $1.68 billion at June 30, 2026. The increase in total loans receivable was primarily attributable to increases in each of the multi-family, construction, and commercial loan categories offset by decreases in the one-to-four family and commercial real estate loan categories.

Previous wording

Allowance for Credit Losses - Loans** -** The allowance for credit losses increased to $17.7 million at March 31, 2026. There was a $264,000 provision for credit losses - loans for the three months ended March 31, 2026. The provision for credit losses related to loans was primarily due to increases in multi-family and construction loan balances along with an increase in multifamily external qualitative factors. The provision for credit losses related to unfunded loan commitments for the quarter ended March 31, 2026 was due primarily to an increase in the loan pipeline balance at quarter end. 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 $11,000 for the three months ended March 31, 2026.

Current wording

Allowance for Credit Losses - Loans** -** The allowance for credit losses increased to $17.9 million at June 30, 2026. There was a $379,000 provision for credit losses - loans for the six months ended June 30, 2026. See Note 3 - Loans Receivable of the notes to unaudited consolidated financial statements for further discussion on the allowance for credit losses.

Previous wording

Prepaid expenses and other assets – Total prepaid expenses and other assets increased $4.4 million to $42.3 million at March 31, 2026. The increase was primarily due to increases in mortgage investor receivables, accounts receivable, and the deferred tax asset for unrealized losses as long term interest rates increased.

Current wording

Prepaid expenses and other assets – Total prepaid expenses and other assets increased $3.9 million to $41.9 million at June 30, 2026. The increase was primarily due to increases in mortgage investor receivables, accounts receivable, back-to-back loan swap fair value adjustment, and the deferred tax asset for unrealized losses as long term interest rates increased.

Previous wording

Deposits – Total deposits increased $1.5 million to $1.44 billion at March 31, 2026. The increase was driven by increases of $6.2 million in demand deposits and $13.5 million in money market and savings deposits offset by a decrease of $18.1 million in time deposits.

Current wording

Deposits – Total deposits decreased $16.3 million to $1.42 billion at June 30, 2026. The increase was driven by a decrease of $37.2 million in time deposits offset by increases of $6.4 million in demand deposits and $14.5 million in money market and savings deposits.

Previous wording

Borrowings – Total borrowings increased $800,000, or 0.2%, to $413.0 million at March 31, 2026. The community banking segment increased its FHLB long-term borrowings by $83.0 million, decreased its short-term FHLB borrowings by $52.2 million, and paid off $30.0 million in long-term FHLB borrowings. External short-term borrowings at the mortgage banking segment decreased by a total of $30,000 at March 31, 2026 from December 31, 2025.

Current wording

Borrowings – Total borrowings decreased $258,000, or 0.1%, to $412.0 million at June 30, 2026. The community banking segment increased its FHLB long-term borrowings by $103.0 million, decreased its short-term FHLB borrowings by $23.7 million, and paid off $80.0 million in long-term FHLB borrowings. External short-term borrowings at the mortgage banking segment increased by a total of $435,000 at June 30, 2026 from December 31, 2025.

Previous wording

Advance Payments by Borrowers for Taxes - Advance payments by borrowers for taxes increased $8.1 million to $11.1 million at March 31, 2026. 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 $15.8 million to $18.8 million at June 30, 2026. 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 $17.5 million to $40.1 million at March 31, 2026. 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.

Current wording

Other Liabilities - Other liabilities decreased $7.7 million to $49.9 million at June 30, 2026. 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.

Previous wording

Shareholders’** Equity** – Shareholders' equity decreased $1.2 million to $348.2 million at March 31, 2026. Shareholders' equity decreased primarily due to decreases in the fair value of securities, shares repurchased, and dividends declared during the period.

Current wording

Shareholders’** Equity** – Shareholders' equity increased $1.7 million to $351.1 million at June 30, 2026. Shareholders' equity increased primarily due to net income offset by a decrease in the fair value of securities, shares repurchased, and dividends declared during the period.

Previous wording

Of the $7.5 million in total non-accrual loans as of March 31, 2026, $5.1 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 March 31, 2026. The remaining $2.4 million of non-accrual loans were reviewed on an aggregate basis as of March 31, 2026.

Current wording

Of the $6.5 million in total non-accrual loans as of June 30, 2026, $4.7 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, 2026. The remaining $1.8 million of non-accrual loans were reviewed on an aggregate basis as of June 30, 2026.

Previous wording

The outstanding principal balance of our five largest non-accrual loans as of March 31, 2026 totaled $3.2 million, which represents 42.6% of total non-accrual loans as of that date. The loans held for investment at the mortgage segment were reviewed on an aggregate basis.

Current wording

The outstanding principal balance of our five largest non-accrual loans as of June 30, 2026 totaled $3.2 million, which represents 48.9% of total non-accrual loans as of that date. The loans held for investment at the mortgage segment were reviewed on an aggregate basis.

Previous wording

Past due loans decreased by $4.6 million, or 32.1%, to $9.8 million at March 31, 2026 from $14.4 million at December 31, 2025. Loans past due less than 90 days decreased by $5.5 million, or 57.1%, primarily due to a decrease in the one-to four-family loan category. Loans past due 90 days or more increased by $844,000, or 17.5%, primarily in the one-to four-family loan category during the three months ended March 31, 2026.

Current wording

Past due loans decreased by $3.8 million, or 26.3%, to $10.6 million at June 30, 2026 from $14.4 million at December 31, 2025. Loans past due less than 90 days decreased by $3.3 million, or 33.9%, primarily due to a decrease in the one-to four-family loan category. Loans past due 90 days or more decreased by $534,000, or 11.1%, primarily in the one-to four-family loan category during the six months ended June 30, 2026.

Previous wording

During the three months ended March 31, 2026, primary uses of cash and cash equivalents included: $505.5 million in funding loans held for sale, $8.7 million to fund loans receivable, $8.7 million for purchases of mortgage related securities, $8.6 million for purchases of debt securities, $52.2 million for payoffs of short-term borrowings, $30.0 million for payoffs of long-term borrowings, $2.6 million for cash dividends paid, and $4.4 million for purchases of our common stock.

Current wording

During the six months ended June 30, 2026, primary uses of cash and cash equivalents included: $1.12 billion in funding loans held for sale, $8.3 million to fund loans receivable, $14.2 million for purchases of mortgage related securities, $5.7 million for purchases of debt securities, $23.2 million for payoffs of short-term borrowings, $80.0 million for payoffs of long-term borrowings, $16.3 million for a decrease in deposits, $5.5 million for cash dividends paid, and $8.1 million for purchases of our common stock.

Previous wording

During the three months ended March 31, 2026, primary sources of cash and cash equivalents included: $524.9 million in proceeds from the sale of loans held for sale, $83.0 million in long-term borrowings, $6.5 million in principal repayments on mortgage related securities, $2.4 million in sales of FHLB stock, $1.5 million for increase in deposits, $120,000 in maturities of debt securities, $548,000 in proceeds from exercised stock options, and $6.0 million in net income.

Current wording

During the six months ended June 30, 2026, primary sources of cash and cash equivalents included: $1.15 billion in proceeds from the sale of loans held for sale, $103.0 million in long-term borrowings, $13.9 million in principal repayments on mortgage related securities, $2.4 million in sales of FHLB stock, $585,000 in maturities of debt securities, $1.0 million in proceeds from exercised stock options, and $14.5 million in net income.

Previous wording

A portion of our liquidity consists of cash and cash equivalents, which are a product of our operating, investing and financing activities. At March 31, 2026 and 2025, respectively, $44.7 million and $43.3 million of our assets were invested in cash and cash equivalents. At March 31, 2026, cash and cash equivalents were comprised of the following: $38.8 million in cash held at the Federal Reserve Bank and other depository institutions and $5.9 million in federal funds sold and short-term investments. 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, advances from the FHLB and the Federal Reserve, and repurchase agreements from other institutions.

Current wording

A portion of our liquidity consists of cash and cash equivalents, which are a product of our operating, investing and financing activities. At June 30, 2026 and 2025, respectively, $38.2 million and $70.9 million of our assets were invested in cash and cash equivalents. At June 30, 2026, cash and cash equivalents were comprised of the following: $32.7 million in cash held at the Federal Reserve Bank and other depository institutions and $5.5 million in federal funds sold and short-term investments. 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, advances from the FHLB and the Federal Reserve, and repurchase agreements from other institutions.

Previous wording

Liquidity management is both a daily and longer-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLB which provide an additional source of funds. At March 31, 2026, we had $243.0 million in long term advances from the FHLB with contractual maturity dates in 2027, 2028, 2029, 2030, and 2031. See Note 6 - Borrowings of the notes to unaudited consolidated financial statements for additional information about the remaining call option details of our FHLB long-term debt.

Current wording

Liquidity management is both a daily and longer-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLB which provide an additional source of funds. At June 30, 2026, we had $213.0 million in long term advances from the FHLB with contractual maturity dates in 2027, 2028, 2029, 2030, and 2031. See Note 6 - Borrowings of the notes to unaudited consolidated financial statements for additional information about the remaining call option details of our FHLB long-term debt.

Previous wording

The Company had approximately $383.2 million of uninsured deposits for approximately 1,509 customers as of March 31, 2026. Uninsured deposit amounts are estimated based on the portions of customer account balances that exceed the FDIC insurance limits.

Current wording

The Company had approximately $397.9 million of uninsured deposits for approximately 1,551 customers as of June 30, 2026. Uninsured deposit amounts are estimated based on the portions of customer account balances that exceed the FDIC insurance limits.

Previous wording

At March 31, 2026, we had outstanding commitments to originate loans receivable of $36.0 million. In addition, at March 31, 2026, we had unfunded commitments under construction loans of $34.1 million, unfunded commitments under business lines of credit of $13.2 million and unfunded commitments under home equity lines of credit and standby letters of credit of $12.8 million. At March 31, 2026, certificates of deposit scheduled to mature in one year or less totaled $859.7 million. Based on prior experience, management believes that, subject to the Bank’s funding needs, a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In the event a significant portion of our deposits is not retained by us, we will have to utilize other funding sources, such as FHLB advances, in order to maintain our level of assets. However, we cannot assure that such borrowings would be available on attractive terms, or at all, if and when needed. Alternatively, we could reduce our level of liquid assets, such as our cash and cash equivalents and securities available-for-sale in order to meet funding needs. 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.

Current wording

At June 30, 2026, we had outstanding commitments to originate loans receivable of $57.6 million. In addition, at June 30, 2026, we had unfunded commitments under construction loans of $29.6 million, unfunded commitments under business lines of credit of $11.4 million and unfunded commitments under home equity lines of credit and standby letters of credit of $13.2 million. At June 30, 2026, certificates of deposit scheduled to mature in one year or less totaled $864.9 million. Based on prior experience, management believes that, subject to the Bank’s funding needs, a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In the event a significant portion of our deposits is not retained by us, we will have to utilize other funding sources, such as FHLB advances, in order to maintain our level of assets. However, we cannot assure that such borrowings would be available on attractive terms, or at all, if and when needed. Alternatively, we could reduce our level of liquid assets, such as our cash and cash equivalents and securities available-for-sale in order to meet funding needs. 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.

Previous wording

Waterstone Financial, Inc. is a separate legal entity from WaterStone Bank and must provide for its own liquidity to pay dividends to its shareholders, repurchase shares of its common stock, and for other corporate purposes. The primary source of liquidity for Waterstone Financial, Inc. is dividend payments from WaterStone Bank. The ability of WaterStone Bank to pay dividends is subject to regulatory restrictions. At March 31, 2026, Waterstone Financial, Inc. (on an unconsolidated basis) had liquid assets totaling $11.2 million.

Current wording

Waterstone Financial, Inc. is a separate legal entity from WaterStone Bank and must provide for its own liquidity to pay dividends to its shareholders, repurchase shares of its common stock, and for other corporate purposes. The primary source of liquidity for Waterstone Financial, Inc. is dividend payments from WaterStone Bank. The ability of WaterStone Bank to pay dividends is subject to regulatory restrictions. At June 30, 2026, Waterstone Financial, Inc. (on an unconsolidated basis) had liquid assets totaling $20.8 million.

Previous wording

The Company's Board of Directors authorized a 2,000,000 share stock repurchase program in the second quarter of 2024. As of March 31, 2026, the Company has approximately 223,000 shares remaining in the plan.

Current wording

The Company's Board of Directors authorized a 2.0 million share stock repurchase program on April 27, 2026. As of June 30, 2026, the Company has approximately 2.0 million shares remaining in the program.

Previous wording

During the three months ended March 31, 2026, we entered into $83.0 million of new long-term debt, repaid $30.0 million of existing long-term debt, and repaid $52.2 million in short-term debt.

Current wording

During the three months ended June 30, 2026, we entered into $20.0 million of new long-term debt, repaid $50.0 million of existing long-term debt, and borrowed an additional $28.5 million in short-term debt.