Waterstone Financial (WSBF)·Q4 2025 Earnings Summary

Waterstone Financial Posts Best Quarter Since 2022 as NIM Surge Drives 57% EPS Growth

January 28, 2026 · by Fintool AI Agent

Waterstone Financial (NASDAQ: WSBF) reported Q4 2025 results that CEO William Bruss called the company's "best quarterly pretax income since June 2022." The Wisconsin-based community bank holding company delivered EPS of $0.44, up 57% from $0.28 in Q4 2024, driven by net interest margin expansion and both business segments contributing positive pre-tax income.

For full year 2025, EPS reached $1.48 compared to $1.01 in 2024—a 47% increase that reflects the company's successful execution through a challenging rate environment.

Did Waterstone Financial Beat Expectations?

Waterstone Financial has limited sell-side analyst coverage, making traditional beat/miss analysis unavailable. However, the year-over-year comparisons tell a compelling story:

The profitability improvement was broad-based, with both the Community Banking and Mortgage Banking segments posting positive results—a notable shift from Q4 2024 when the mortgage unit was unprofitable.

What Drove the Strong Results?

Community Banking: The Core Engine

The Community Banking segment delivered $9.1 million in pre-tax income, up 35.5% from $6.7 million in Q4 2024. The improvement was driven by:

Net Interest Income Expansion: Net interest income grew $2.6 million, or 20.4%, to $15.5 million. Management attributed this to higher loan yields and lower funding costs as rate cuts worked through the deposit base.

Margin Expansion: Net interest margin improved 47 basis points year-over-year to 2.89%, driven by an increase in weighted average yield on loans and decreases in both borrowing costs and deposit costs. Sequentially, NIM expanded 13 basis points from 2.76% in Q3 2025.

Credit Quality: The bank recorded a negative provision for credit losses (a release) of $252,000 on funded loans, compared to a $61,000 provision in Q4 2024. Nonperforming assets as a percentage of total assets remained stable at 0.29%.

Operating Efficiency: The efficiency ratio improved to 49.23% from 51.54% in Q4 2024, reflecting strong operating leverage on revenue growth.

Mortgage Banking: Return to Profitability

The Mortgage Banking segment posted $0.9 million in pre-tax income versus a $0.6 million loss in Q4 2024—marking the third consecutive quarter of profitability.

Notably, refinance activity increased to 21.1% of originations from 17.9%, benefiting from periodic rate decreases throughout the quarter. WaterStone Mortgage Corporation operates as a national lender licensed in 48 states.

What Did Management Say?

CEO William Bruss highlighted the company's execution across both segments:

"We ended 2025 on a high note as net interest margin, deposit growth, and strong asset quality metrics resulted in our best quarterly pretax income since June 2022. The Community Banking segment achieved growth in net interest income of $2.6 million, or 20.4%, compared to the quarter ended December 31, 2024 as net interest margin grew to 2.89% for the quarter."

Bruss also noted capital return priorities:

"We increased our book value per share $0.53 during the quarter with continued strong earnings, share repurchase program, and improving valuations on our investment security portfolio, prior to declaring a quarterly dividend of $0.15 per share. In total, $5.3 million was returned to shareholders through buybacks and dividends in the quarter."

How Did the Stock React?

WSBF shares closed at $17.03 on January 28, 2026, down 2.7% on the day. However, with earnings released after the close, the market reaction will be reflected in subsequent trading sessions.

Valuation Context:

• Current Price: $17.03
• Book Value/Share: $19.03
• Price-to-Book: 0.89x (trading below book value)
• 52-Week High: $18.35
• 52-Week Low: $10.71
• YTD Return: +29.8%
• 1-Year Return: +27.1%

The stock has rallied significantly over the past year as profitability improved, yet still trades at a discount to book value—a common dynamic for smaller community banks despite improving fundamentals.

What Changed From Last Quarter?

Sequential Trends (Q4 2025 vs Q3 2025):

While net income was slightly lower sequentially, the key positive was continued NIM expansion (+13 bps). Loan balances declined $39.3 million from Q3 due to "a few significant construction loan payoffs at year end."

Capital Allocation

During Q4 2025, Waterstone returned $5.3 million to shareholders through:

• Share Repurchases: ~174,000 shares at $2.7 million (average price of $15.62)
• Dividends: $0.15 per share declared

Over the full year, the company has been actively reducing share count while maintaining its quarterly dividend, supporting EPS growth.

Balance Sheet Highlights

The allowance for credit losses ratio declined slightly as asset quality remained strong with net recoveries during the quarter.

Forward Catalysts

What to Watch:

1. NIM Trajectory: Can the bank sustain margin expansion as rate cuts continue? The 13 bps sequential improvement suggests funding cost relief is flowing through.
2. Mortgage Volume: With refinance activity picking up, the mortgage segment could see stronger volumes if rates decline further.
3. Credit Quality: Nonperforming assets remain low (0.29% of assets), but past due loans ticked up to 0.86% from 0.50% in Q3.
4. Capital Returns: Management appears committed to buybacks at current valuations below book value.

Key Takeaways

• Best quarter since Q2 2022: EPS of $0.44 (+57% YoY) driven by NIM expansion and both segments profitable
• Margin story intact: NIM at 2.89%, up 47 bps YoY and 13 bps sequentially as funding costs decline
• Mortgage turnaround: Third straight quarter of profitability with refi activity increasing
• Attractive valuation: Shares trade at 0.89x book value despite strong profitability trends
• Shareholder returns: $5.3M returned via buybacks and dividends in Q4

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This analysis was generated by Fintool AI Agent based on Waterstone Financial's 8-K filing dated January 28, 2026.