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Waterstone Financial, Inc. (WSBF)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 EPS of $0.17 on net income of $3.0M was flat YoY and down QoQ, as improving Community Banking NIM and a negative provision were offset by a mortgage segment pre-tax loss tied to lower volumes and elevated legal expenses .
  • Community Banking NIM expanded to 2.47% (+32 bps YoY, +5 bps QoQ) on higher asset yields and lower borrowing costs; ROA/ROE were 0.57%/3.61% .
  • Mortgage Banking posted a pre-tax loss of $2.2M on 20% lower originations ($387.7M) and higher professional fees from finalizing a legal settlement; gross sale margin held at 3.98% .
  • No formal forward guidance; dividend maintained at $0.15 and buybacks continued (237k shares; $3.2M, $13.37/share) .
  • Consensus estimates were not available from S&P Global for EPS/Revenue this quarter, so a beat/miss determination is not possible (see Estimates Context). Values retrieved from S&P Global.*

What Went Well and What Went Wrong

  • What Went Well

    • Community Banking profitability improved: pre-tax income rose to $6.1M (+42% YoY), with NIM +32 bps YoY and +5 bps QoQ; efficiency ratio improved YoY to 59.66% .
    • Deposit franchise trends: average core retail deposits rose 7.4% YoY to $1.28B, with modest QoQ growth despite a competitive funding backdrop .
    • Provision tailwinds: negative provision for credit losses (-$314k funded; -$204k unfunded) reflecting low historical losses and portfolio changes, partially offset by higher CRE qualitative factors .
    • Management quote: “The Community Banking segment continues to perform well… net interest margin increased 32 bps… Asset quality continues to remain strong…” — William Bruss, CEO .

  • What Went Wrong

    • Mortgage Banking loss: pre-tax loss of $2.2M vs. $0.4M profit in Q1’24, as originations fell 20% YoY to $387.7M and non-interest income declined 23% YoY to $15.7M .
    • Elevated legal costs: professional fees in Mortgage rose 164% YoY to $1.4M, tied to finalizing a previously disclosed settlement .
    • Asset quality mixed: nonperforming assets to total assets rose QoQ to 0.35% (from 0.28%), albeit still low; nonaccrual loans rose to 0.45% of loans .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Net Income ($M)$3.038 $5.210 $3.036
Diluted EPS ($)$0.16 $0.28 $0.17
Net Interest Income ($M)$11.137 $12.835 $12.576
Total Noninterest Income ($M)$21.248 $19.005 $17.097
Total Noninterest Expense ($M)$27.550 $25.267 $26.350
Net Interest Margin (QTD, %)2.15% 2.42% 2.47%
ROA (QTD, %)0.56% 0.94% 0.57%
ROE (QTD, %)3.56% 6.05% 3.61%

Segment breakdown

Segment / MetricQ1 2024Q4 2024Q1 2025
Community Banking Pre-tax Income ($M)$4.279 $6.687 $6.065
Community Net Interest Income ($M)$11.598 $12.886 $12.403
Community Efficiency Ratio (QTD, %)65.17% 51.54% 59.66%
Mortgage Pre-tax (Loss) Income ($M)$0.369 $(0.625) $(2.213)
Mortgage Loan Originations ($M)$485.109 $470.650 $387.729
Mortgage Gross Margin on Loans Sold (%)4.10% 3.74% 3.98%
Mortgage Professional Fees ($M)$0.520 $0.917 $1.373

KPIs

KPIQ1 2024Q4 2024Q1 2025
Past Due Loans / Total Loans (%)0.64% 0.95% 0.67%
Nonperforming Assets / Total Assets (%)0.23% 0.28% 0.35%
Book Value per Share ($)$16.98 $17.53 $17.70
Avg Core Retail Deposits ($B)$1.19 $1.27 $1.28
Brokered CDs ($M)—$94.3 $84.1
Share Repurchases (Shares, $M)417k; $5.3 194k; $2.8 237k; $3.2
Dividend per Share ($)$0.15 $0.15 $0.15

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Financial Guidance (Revenue, EPS, Margins)Q2 2025+None issuedNone issuedMaintained (no guidance)
Dividend per ShareQ1 2025$0.15$0.15 (declared, payable May 1, 2025)Maintained
Share RepurchaseOngoingActive in prior quarters237k shares repurchased in Q1 2025 at $13.37 avgContinued

Note: The company did not provide quantitative forward guidance ranges in the press release.

Earnings Call Themes & Trends

Note: A Q1 2025 earnings call transcript was not available in our document set; themes are derived from press releases.

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Interest rate environment & funding costsRate cuts began to help borrowings, but retail funding competition remained a headwind .NIM expanded YoY/QoQ on higher loan yields and lower borrowings; deposit costs moderated slightly .Gradual improvement in NIM; funding still competitive .
Asset quality & provisionsNegative provision on net recoveries/improved metrics (Q3) ; modest provision increase (Q4) .Negative provision (funded and unfunded) on low loss history and portfolio changes; CRE qualitative factors increased .Stable overall with low losses; watch CRE .
Mortgage volumes/marginsMortgage remained profitable on cost control; originations -6.5% YoY (Q3) .Originations -20% YoY; gross margin 3.98%; segment loss on volumes and legal costs .Weaker volumes; margins resilient; legal costs elevated .
Deposits & brokered mixCore deposits up; minimal brokered CDs (Q3: $2M) .Avg core deposits +7.4% YoY; brokered CDs $84.1M at Q1-end .Core growth steady; brokered usage higher vs Q3 .
Legal/regulatoryNo major issues highlighted in Q3/Q4 PRs .Finalized settlement drove higher professional fees in Mortgage .One-time legal expense likely behind; to normalize .
Capital returnDividend $0.15 and buybacks ongoing .Dividend maintained; 237k shares repurchased .Consistent capital return .

Management Commentary

  • “The Community Banking segment continues to perform well in a challenging interest rate environment… we increased net interest income 6.9%… net interest margin increased 32 bps… Asset quality continues to remain strong… The Mortgage Banking segment pre-tax loss reflects a market-wide decrease in loan origination volumes and elevated legal expense… In spite of the results of the Mortgage Banking segment, Waterstone Financial, Inc. exceeded the prior year's same quarter EPS, added to book value per share through our share repurchase program and maintained our strong quarterly dividend.” — William Bruss, CEO .

Key strategic messages

  • Focus on NIM resilience via asset yields and funding mix while maintaining asset quality; negative provision reflects low loss profile .
  • Mortgage cost discipline continues, but lower volumes and one-time legal costs pressured profitability; gross sale margin held near 4% .
  • Capital return priorities unchanged: dividend maintained; opportunistic buybacks contributed to book value accretion .

Q&A Highlights

  • A Q1 2025 earnings call transcript was not available; no Q&A themes or clarifications could be reviewed in our document set. (We searched for an earnings call transcript and found none for Q1 2025.)

Estimates Context

  • S&P Global shows no active Wall Street consensus for Q1 2025 EPS or revenue for WSBF; therefore, a beat/miss assessment vs. consensus is unavailable this quarter.*
  • Implication: With limited coverage, investor focus should center on trajectory (NIM expansion, asset quality stability) and segment mix, rather than headline beats/misses.

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Community Banking is the earnings anchor: NIM expanded to 2.47% and pre-tax income rose 42% YoY; this is the principal offset to mortgage cyclicality .
  • Mortgage headwinds persist: originations fell 20% YoY and legal settlement costs drove a segment loss; watch for seasonal upticks and any legal expense normalization next quarter .
  • Asset quality remains a strength: negative provision and low loss experience continue, though CRE qualitative risk factors were increased; monitor NPA creep (0.35% of assets) .
  • Funding mix is improving but still competitive: core deposits grew and deposit costs edged down QoQ; brokered CDs remain part of the toolkit ($84.1M) .
  • Capital return steady: dividend held at $0.15 and buybacks continued (237k shares; $3.2M), supporting book value accretion ($17.70) .
  • Near-term trading setup: upside on continued NIM expansion and any rebound in mortgage volumes; risks include sustained housing turnover weakness, CRE risk normalization, and funding cost pressure .
  • Medium-term thesis: maintain exposure for core bank stability and capital returns; treat mortgage as an option on rate/volume recovery, with cost discipline and margin resilience mitigating downside .