What changed in this filing

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Item 1. Financial Statements

2024-11-04 compared with 2024-08-06 · 415 added, 379 removed, 1739 unchanged (31% of the section changed)

3 unchanged sentences

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

June 30, 2024

September 30, 2024

December 31, 2023

44 unchanged sentences

Shareholders’ equity:

Preferred stock (par value $ .01 per share) Authorized - 50,000,000 shares at June 30, 2024 and at December 31, 2023, no shares issued

Common stock (par value $ .01 per share) Authorized - 100,000,000 shares at June 30, 2024 and at December 31, 2023, Issued and Outstanding - 19,478,625 at June 30, 2024 and 20,314,786 at December 31, 2023

Preferred stock (par value $ .01 per share) Authorized - 50,000,000 shares at September 30, 2024 and at December 31, 2023, no shares issued

Common stock (par value $ .01 per share) Authorized - 100,000,000 shares at September 30, 2024 and at December 31, 2023, Issued and Outstanding - 19,456,939 at September 30, 2024 and 20,314,786 at December 31, 2023

Additional paid-in capital

14 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(In Thousands, except per share amounts)

Interest income:

$ 25,601 $ 22,150 $ 50,085 $ 42,035

Mortgage-related securities

1,125 969 2,223 1,912

Debt securities, federal funds sold and short-term investments

1,294 1,128 2,617 2,190

Total interest income

28,020 24,247 54,925 46,137

Interest expense:

9,716 5,955 18,686 10,043

7,625 5,617 14,423 9,624

Total interest expense

17,341 11,572 33,109 19,667

Net interest income

10,679 12,675 21,816 26,470

Provision (credit) for credit losses

( 225 ) 186 ( 158 ) 646

Net interest income after provision (credit) for credit losses

10,904 12,489 21,974 25,824

Noninterest income:

Service charges on loans and deposits

465 611 889 1,041

Increase in cash surrender value of life insurance

804 714 1,152 1,039

Mortgage banking income

24,838 21,914 44,906 38,684

390 286 798 1,315

Total noninterest income

26,497 23,525 47,745 42,079

Noninterest expenses:

Compensation, payroll taxes, and other employee benefits

21,762 22,395 41,638 42,447

Occupancy, office furniture, and equipment

2,029 2,046 4,137 4,309

987 944 1,901 1,833

Data processing

1,242 1,090 2,448 2,212

Communications

240 225 466 476

Professional fees

758 618 1,501 1,034

Real estate owned

Loan processing expense

861 932 1,907 1,950

2,379 2,671 3,797 5,766

Total noninterest expenses

30,259 30,922 57,809 60,029

Income before income taxes

7,142 5,092 11,910 7,874

Income tax expense

1,430 1,085 3,160 1,712

$ 5,712 $ 4,007 $ 8,750 $ 6,162

Income per share:

$ 0.31 $ 0.20 $ 0.47 $ 0.30

Weighted average shares outstanding:

18,524 20,384 18,772 20,635

18,568 20,431 18,802 20,702

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(In Thousands)

$ 4,728 $ 3,253 $ 13,478 $ 9,415

Other comprehensive loss, net of tax:

Net unrealized holding loss on available for sale securities:

Net unrealized holding loss arising during the period, net of tax benefit (expense) of $ 134 , $( 174 ), $ 539 , and $ 616 , respectively

Other comprehensive income (loss), net of tax:

Net unrealized holding gain (loss) on available for sale securities:

Net unrealized holding gain (loss) arising during the period, net of tax (expense) benefit of ($ 1,394 ), $ 1,101 , ($ 855 ), and $ 485 , respectively

4,965 ( 3,444 ) 3,042 ( 4,796 )

Total other comprehensive loss

Total other comprehensive income (loss)

4,965 ( 3,444 ) 3,042 ( 4,796 )

9 unchanged sentences

(In Thousands, except per share amounts)

For the six months ended June 30, 2023

For the nine months ended September 30, 2023

Balances at December 31, 2022

2 unchanged sentences

- - - 9,415 - - 9,415

Other comprehensive income

Other comprehensive loss

- - - - - ( 4,796 ) ( 4,796 )

4 unchanged sentences

- - - ( 11,126 ) - - ( 11,126 )

Proceeds from stock option exercises

Stock compensation activity, net of tax

86 1 818 - - - 819

3 unchanged sentences

( 1,400 ) ( 14 ) ( 19,829 ) - - - ( 19,843 )

Balances at June 30, 2023

Balances at September 30, 2023

20,860 $ 209 $ 110,020 $ 272,535 $ ( 12,166 ) $ ( 24,272 ) $ 346,326

(In Thousands, except per share amounts)

For the six months ended June 30, 2024

For the nine months ended September 30, 2024

Balances at December 31, 2023

2 unchanged sentences

- - - 13,478 - - 13,478

Other comprehensive loss

Other comprehensive income

- - - - - 3,042 3,042

10 unchanged sentences

( 975 ) ( 10 ) ( 12,105 ) - - - ( 12,115 )

Balances at June 30, 2024

Balances at September 30, 2024

19,457 $ 194 $ 92,789 $ 274,748 $ ( 10,979 ) $ ( 14,750 ) $ 342,002

3 unchanged sentences

(In Thousands, except per share amounts)

For the three months ended June 30, 2023

Balances at March 31, 2023

For the three months ended September 30, 2023

Balances at June 30, 2023

21,376 $ 214 $ 116,611 $ 272,229 $ ( 12,463 ) $ ( 20,828 ) $ 355,763

Comprehensive income:

Comprehensive loss:

- - - 3,253 - - 3,253

1 unchanged sentence

- - - - - ( 3,444 ) ( 3,444 )

Total comprehensive income

Total comprehensive loss

ESOP shares committed to be released to Plan participants

8 unchanged sentences

( 516 ) ( 5 ) ( 6,675 ) - - - ( 6,680 )

Balances at June 30, 2023

Balances at September 30, 2023

20,860 $ 209 $ 110,020 $ 272,535 $ ( 12,166 ) $ ( 24,272 ) $ 346,326

(In Thousands, except per share amounts)

For the three months ended June 30, 2024

Balances at March 31, 2024

For the three months ended September 30, 2024

Balances at June 30, 2024

19,479 195 92,964 272,778 ( 11,276 ) ( 19,715 ) 334,946

Comprehensive loss:

Comprehensive income:

- - - 4,728 - - 4,728

Other comprehensive loss

Other comprehensive income

- - - - - 4,965 4,965

10 unchanged sentences

( 72 ) ( 1 ) ( 998 ) - - - ( 999 )

Balances at June 30, 2024

Balances at September 30, 2024

19,457 $ 194 $ 92,789 $ 274,748 $ ( 10,979 ) $ ( 14,750 ) $ 342,002

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended June 30,

Nine months ended September 30,

(In Thousands)

Operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Provision (credit) for credit losses

8 unchanged sentences

Increase in cash surrender value of life insurance

Increase in derivative assets

(Decrease) increase in derivative assets

Increase in accrued interest on deposits and borrowings

Decrease in prepaid tax expense

Increase (decrease) in derivative liabilities

Decrease in derivative liabilities

Gain on sale of mortgage servicing rights

Increase in other assets

Decrease in other liabilities

Net cash used in operating activities

Increase (decrease) in other liabilities

Net cash provided by (used in) operating activities

Investing activities:

8 unchanged sentences

Maturities of debt securities

Sales of FHLB Stock

Proceeds on sales of mortgage servicing rights

2 unchanged sentences

Financing activities:

Net increase (decrease) in deposits

Net increase in deposits

Net change in short-term borrowings

20 unchanged sentences

WaterStone Bank SSB (the "Bank") is a community bank that has served the banking needs of its customers since 1921.

WaterStone Bank also has an active mortgage banking subsidiary, Waterstone Mortgage Corporation.

WaterStone Bank owns Wauwatosa Investments, Inc, an investment subsidiary, and has an active mortgage banking segment, Waterstone Mortgage Corporation.

WaterStone Bank conducts its community banking business from 14 banking offices located in Milwaukee, Washington and Waukesha Counties, Wisconsin.

4 unchanged sentences

certificates of deposit, money market savings accounts, transaction deposit accounts, non-interest bearing demand accounts and individual retirement accounts.

Wauwatosa Investments, Inc.

operates in Nevada as owns and manages the majority of the consolidated investment portfolio.

The investment securities portfolio is comprised principally of mortgage-backed securities, government-sponsored enterprise bonds and municipal obligations.

6 unchanged sentences

The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the Company’s December 31, 2023 Annual Report on Form 10 -K.

Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or for any other period.

Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or for any other period.

The preparation of the unaudited consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period.

3 unchanged sentences

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the unaudited consolidated financial statements included in this Quarterly Report on Form 10 -Q were issued.

There were no significant subsequent events for the three and six months ended June 30, 2024 through the issuance date of these unaudited consolidated financial statements that warranted adjustment to or disclosure in the unaudited consolidated financial statements.

Certain immaterial revisions have been made to the interim consolidated financial statements to move cash flows stemming from sales of mortgage servicing rights from operating cash flows to investing cash flows.

These revisions did not have a significant impact on the financial statement line items impacted.

There were no significant subsequent events for the three and nine months ended September 30, 2024 through the issuance date of these unaudited consolidated financial statements that warranted adjustment to or disclosure in the unaudited consolidated financial statements.

Impact of Recent Accounting Pronouncements

6 unchanged sentences

The amortized cost and fair values of the Company’s investment in securities available for sale follow:

June 30, 2024

September 30, 2024

(In Thousands)

38 unchanged sentences

The Company’s mortgage-backed securities and collateralized mortgage obligations issued by government sponsored enterprises are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.

At June 30, 2024 , and December 31, 2023 , $ 118.8 million and $ 128.1 million of the Company’s mortgage related securities were pledged as collateral to secure funding from the Federal Reserve Bank's new borrowing facility.

Additionally at June 30, 2024 , $ 143,000 of the Company's mortgage related securities were pledged as collateral to secure mortgage banking related activities.

At September 30, 2024 , and December 31, 2023 , $ 119.1 million and $ 128.1 million of the Company’s mortgage related securities were pledged as collateral to secure funding from the Federal Reserve Bank's new borrowing facility.

Additionally at September 30, 2024 , $ 130,000 of the Company's mortgage related securities were pledged as collateral to secure mortgage banking related activities.

At December 31, 2023 , $ 183,000 of the Company's mortgage related securities were pledged as collateral to secure mortgage banking related activities.

The amortized cost and fair values of investment securities by contractual maturity at June 30, 2024 are shown below.

The amortized cost and fair values of investment securities by contractual maturity at September 30, 2024 are shown below.

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

12 unchanged sentences

Gross unrealized losses on securities available for sale and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows:

June 30, 2024

September 30, 2024

Less than 12 months

35 unchanged sentences

In making this evaluation, management considers the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

As of June 30, 2024 and December 31, 2023 , no allowance for credit losses on securities was recognized.

As of September 30, 2024 and December 31, 2023 , no allowance for credit losses on securities was recognized.

The Company does not consider its securities with unrealized losses to be attributable to credit-related factors, as the unrealized losses in each category have occurred as a result of changes in noncredit-related factors such as changes in interest rates, market spreads and market conditions subsequent to purchase, not credit deterioration.

Furthermore, the Company does not have the intent to sell any of these securities and believes that it is more likely than not that we will not have to sell any such securities before a recovery of cost.

During the three and six months ended June 30, 2024 and June 30, 2023 , there were no sales of securities.

During the three and nine months ended September 30, 2024 and September 30, 2023 , there were no sales of securities.

Note 3 - Loans Receivable

Loans receivable at June 30, 2024 and December 31, 2023 are summarized as follows:

June 30, 2024

Loans receivable at September 30, 2024 and December 31, 2023 are summarized as follows:

September 30, 2024

December 31, 2023

17 unchanged sentences

While the real estate collateralizing these loans is primarily residential in nature, it ranges from owner-occupied single family homes to large apartment complexes.

Qualifying loans receivable totaling $ 1.25 billion and $ 1.25 billion at June 30, 2024 and December 31, 2023 , respectively, were pledged as collateral against $ 516.0 million and $ 464.0 million in outstanding Federal Home Loan Bank of Chicago ("FHLB") advances under a blanket security agreement at June 30, 2024 and December 31, 2023 .

Qualifying loans receivable totaling $ 1.24 billion and $ 1.25 billion at September 30, 2024 and December 31, 2023 , respectively, were pledged as collateral against $ 423.0 million and $ 464.0 million in outstanding Federal Home Loan Bank of Chicago ("FHLB") advances under a blanket security agreement at September 30, 2024 and December 31, 2023 .

Certain of the Company's executive officers, directors, employees, and their related interests have loans with the Bank.

These loans to related parties are summarized below:

Six months ended

June 30, 2024

June 30, 2023

Nine months ended

September 30, 2024

September 30, 2023

(In Thousands)

Balance at beginning of year

Balance at beginning of period

$ 3,319 $ 2,847

( 505 ) ( 137 )

Balance at end of year

Balance at end of period

$ 3,091 $ 3,168

None of these loans were past due or considered impaired as of June 30, 2024 or December 31, 2023 .

An analysis of past due loans receivable as of June 30, 2024 and December 31, 2023 follows:

As of June 30, 2024

None of these loans were past due or considered impaired as of September 30, 2024 or December 31, 2023 .

An analysis of past due loans receivable as of September 30, 2024 and December 31, 2023 follows:

As of September 30, 2024

1-59 Days Past Due (1) 60-89 Days Past Due (2) 90 Days or Greater Total Past Due Current (3)

31 unchanged sentences

$ 5,528 $ 1,289 $ 4,433 $ 11,250 $ 1,652,965 $ 1,664,215

( 1 ) Includes $ 667,000 and $ 193,000 at June 30, 2024 and December 31, 2023 , respectively, which are on non-accrual status.

( 2 ) Includes $ - and $ 11,000 at June 30, 2024 and December 31, 2023 , respectively, which are on non-accrual status.

( 3 ) Includes $ 1.0 million and $ 171,000 at June 30, 2024 and December 31, 2023 , respectively, which are on non-accrual status.

The following tables present the activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2024 and the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2023 :

( 1 ) Includes $ 1.1 million and $ 193,000 at September 30, 2024 and December 31, 2023 , respectively, which are on non-accrual status.

( 2 ) Includes $ 4,000 and $ 11,000 at September 30, 2024 and December 31, 2023 , respectively, which are on non-accrual status.

( 3 ) Includes $ 150,000 and $ 171,000 at September 30, 2024 and December 31, 2023 , respectively, which are on non-accrual status.

The following tables present the activity in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2024 and the activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2023 :

One- to Four-Family

2 unchanged sentences

(In Thousands)

Six months ended June 30, 2024

Nine months ended September 30, 2024

Balance at beginning of period

6 unchanged sentences

$ 5,326 $ 7,083 $ 199 $ 1,256 $ 3,768 $ 73 $ 493 $ 18,198

Six months ended June 30, 2023

Nine months ended September 30, 2023

Balance at beginning of period

10 unchanged sentences

(In Thousands)

Three months ended June 30, 2024

Three months ended September 30, 2024

Balance at beginning of period

6 unchanged sentences

$ 5,326 $ 7,083 $ 199 $ 1,256 $ 3,768 $ 73 $ 493 $ 18,198

Three months ended June 30, 2023

Three months ended September 30, 2023

Balance at beginning of period

41 unchanged sentences

This reserve is maintained at a level that management believes is sufficient to absorb losses arising from unfunded loan commitments, and is determined quarterly based on methodology similar to the methodology for determining the ACL-Loans.

The allowance for unfunded commitments at June 30, 2024 and December 31, 2023 was $ 1.1 million and $ 1.1 million.

The allowance for unfunded commitments at September 30, 2024 and December 31, 2023 was $ 972,000 and $ 1.1 million.

Provision for Credit Losses :

3 unchanged sentences

Three months ended

Six months ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Nine months ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

(In Thousands)

9 unchanged sentences

The following tables present collateral dependent loans by portfolio segment and collateral type, including those loans with and without a related allowance allocation.

The following tables present collateral dependent loans by portfolio segment as of June 30, 2024 and December 31, 2023 :

The following tables present collateral dependent loans by portfolio segment as of September 30, 2024 and December 31, 2023 :

One- to Four- Family

50 unchanged sentences

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

The following table presents information relating to the Company’s internal risk ratings of its loans receivable as of June 30, 2024 and December 31, 2023 :

The following table presents information relating to the Company’s internal risk ratings of its loans receivable as of September 30, 2024 and December 31, 2023 :

One to Four-Family

2 unchanged sentences

(In Thousands)

At June 30, 2024

At September 30, 2024

$ 5,087 $ - $ 152 $ - $ 5,333 $ - $ 1,685 $ 12,257

8 unchanged sentences

Credit Quality Information:

The following table presents total loans by risk categories and year of origination as of June 30, 2024 :

The following table presents total loans by risk categories and year of origination as of September 30, 2024 :

(In Thousands)

68 unchanged sentences

The following presents data on restructurings of financing receivables whose borrowers are experiencing financial difficulty:

As of June 30, 2024

As of September 30, 2024

(Dollars in Thousands)

9 unchanged sentences

The following presents restructurings of financing receivables whose borrowers are experiencing financial difficulty by concession type:

As of June 30, 2024

As of September 30, 2024

Performing in accordance with modified terms

12 unchanged sentences

$ 543 2 $ - - $ 543 2

There were no restructurings of financing receivables whose borrowers are experiencing financial difficulty during the three or six months ended June 30, 2024 .

There were no loans modified as troubled debt restructurings during the three or six months ended June 30, 2023 .

There were no restructurings of financing receivables whose borrowers are experiencing financial difficulty within the past twelve months of which there was a default during the three or six months ended June 30, 2024 or June 30, 2023 .

The following table presents data on non-accrual loans as of June 30, 2024 and December 31, 2023 :

June 30, 2024

There were no restructurings of financing receivables whose borrowers are experiencing financial difficulty during the three or nine months ended September 30, 2024 .

There were no loans modified as troubled debt restructurings during the three or nine months ended September 30, 2023 .

The following table presents data on non-accrual loans as of September 30, 2024 and December 31, 2023 :

September 30, 2024

December 31, 2023

11 unchanged sentences

0.24 % 0.22 %

Residential one - to four -family mortgage loans that were in the process of foreclosure were $ 633,000 and $ 250,000 at June 30, 2024 and December 31, 2023 , respectively.

Residential one - to four -family mortgage loans that were in the process of foreclosure were $ 604,000 and $ 250,000 at September 30, 2024 and December 31, 2023 , respectively.

Note 4 — Mortgage Servicing Rights

The following table presents the activity in the Company’s mortgage servicing rights:

Six months ended June 30,

Nine months ended September 30,

(In Thousands)

7 unchanged sentences

$ 491 $ 1,985

During the six months ended June 30, 2024 , $ 1.11 billion in residential loans were originated for sale on a consolidated basis generating mortgage banking income of $ 45.1 million.

During the same period in the prior year, sales of loans held for sale totaled $ 977.8 million, generating mortgage banking income of $ 40.1 million.

The unpaid principal balance of loans serviced for others was $ 43.8 million and $ 238.7 million at June 30, 2024 and December 31, 2023 , respectively.

During the nine months ended September 30, 2024 , $ 1.66 billion in residential loans were originated for sale on a consolidated basis generating mortgage banking income of $ 66.2 million.

During the same period in the prior year, sales of loans held for sale totaled $ 1.58 billion, generating mortgage banking income of $ 59.9 million.

The unpaid principal balance of loans serviced for others was $ 67.0 million and $ 238.7 million at September 30, 2024 and December 31, 2023 , respectively.

These loans are not reflected in the consolidated statements of financial condition.

The fair value of mortgage servicing rights was $ 413,000 at June 30, 2024 and $ 2.2 million at December 31, 2023 , respectively.

During the three and six months ended June 30, 2024 , the Company sold mortgage servicing rights related to $ 233.0 million in loans receivable with a book value of $ 2.0 million for $ 2.1 million resulting in a gain on sale of $ 152,000 .

During the three months ended June 30, 2023 , there were no sales of mortgage servicing rights.

During the six months ended June 30, 2023 , the Company sold mortgage servicing rights related to $ 318.4 million of loans serviced for others with a book value of $ 2.9 million for $ 3.5 million resulting in a gain on sale of $ 583,000 .

The fair value of mortgage servicing rights was $ 499,000 at September 30, 2024 and $ 2.2 million at December 31, 2023 , respectively.

During the three months ended September 30, 2024 , there were no sales of mortgage servicing rights.

During the nine months ended September 30, 2024 , the Company sold mortgage servicing rights related to $ 233.0 million in loans receivable with a book value of $ 2.0 million for $ 2.1 million resulting in a gain on sale of $ 152,000 .

During the three months ended September 30, 2023 , there were no sales of mortgage servicing rights.

During the nine months ended September 30, 2023 , the Company sold mortgage servicing rights related to $ 318.4 million of loans serviced for others with a book value of $ 2.9 million for $3.5 million resulting in a gain on sale of $583,000 .

The following table shows the estimated future amortization expense for mortgage servicing rights for the periods indicated:

2 unchanged sentences

Note 5 — Deposits

At June 30, 2024 and December 31, 2023 , the aggregate balance of uninsured time deposits of $250,000 or more was $ 147.3 million and $ 131.4 million, respectively.

At September 30, 2024 and December 31, 2023 , the aggregate balance of uninsured time deposits of $250,000 or more was $ 160.5 million and $ 131.4 million, respectively.

The Company does not have uninsured deposits less than $250,000 in aggregate balance.

A summary of the contractual maturities of time deposits at June 30, 2024 is as follows:

A summary of the contractual maturities of time deposits at September 30, 2024 is as follows:

(In Thousands)

5 unchanged sentences

Certain directors and executive officers, including their immediate families and companies in which they are principal owners, are depositors of the Bank.

Such deposits amounted to $ 10.8 million and $ 9.0 million at June 30, 2024 and December 31, 2023 , respectively.

Such deposits amounted to $ 13.4 million and $ 9.0 million at September 30, 2024 and December 31, 2023 , respectively.

Note 6 — Borrowings

Borrowings consist of the following:

June 30, 2024

September 30, 2024

Callable/Putable

1 unchanged sentence

FHLB advances

$ 10,000 August 2, 2027

August 1, 2024

10,000 August 5, 2027

August 5, 2024

50,000 December 14, 2027

December 14, 2017

June 14, 2029

June 14, 2024

10,000 May 15, 2029

10,000 June 4, 2029

10,000 June 5, 2029

10,000 June 14, 2029 3.43 % Fixed

Putable June 14, 2024 Monthly

10,000 June 18, 2029 3.47 % Fixed

Putable June 18, 2024 Monthly

10,000 July 9, 2029 3.40 % Fixed

Putable July 8, 2024 Monthly

10,000 July 12, 2029 3.35 % Fixed

Putable July 12, 2024 Monthly

10,000 August 2, 2029 2.89 % Fixed

Putable August 2, 2024 Monthly

10,000 September 6, 2034 2.32 % Fixed

Putable September 6, 2024 Monthly

Total FHLB long-term advances

December 27, 2024

January 29, 2025

July 10, 2024

July 12, 2024

July 17, 2024

July 24, 2024

160,000 2.82 %

40,000 October 1, 2024

15,000 October 3, 2024

12,900 October 3, 2024

4,400 October 3, 2024

29,000 October 7, 2024

22,000 October 15, 2024

14,500 October 15, 2024

4,400 October 15, 2024

23,700 October 15, 2024

10,800 October 15, 2024

14,800 October 21, 2024

2,700 October 21, 2024

11,400 October 21, 2024 4.84 % Fixed

6,800 October 28, 2024 4.83 % Fixed

7,100 October 28, 2024 4.83 % Fixed

23,500 December 27, 2024 4.79 % Fixed

20,000 January 29, 2025 4.74 % Fixed

Total FHLB short-term advances

263,000 5.02 %

Total FHLB advances

423,000 4.19 %

Short-Term Borrowings

2 unchanged sentences

Total federal reserve bank

$ 136,300 4.76 %

Repurchase agreements

$ 827 N/A 7.85 % Variable

Total short-term borrowings

$ 137,127 4.78 %

Total borrowings

$ 560,127 4.33 %

December 31, 2023

2 unchanged sentences

FHLB advances

December 14, 2027

December 14, 2019

August 7, 2028

December 7, 2023

August 8, 2028

December 8, 2023

$ 50,000 December 14, 2027 1.73 % Fixed

Putable December 14, 2019 Single

10,000 August 7, 2028 3.51 % Fixed

Putable December 7, 2023 Quarterly

10,000 August 8, 2028 3.52 % Fixed

Putable December 8, 2023 Quarterly

10,000 October 10, 2028

8 unchanged sentences

December 14, 2023

November 29, 2028

December 29, 2023

November 29, 2028

January 29, 2024

10,000 November 29, 2028 3.38 % Fixed

Putable December 29, 2023 Quarterly

10,000 November 29, 2028 3.43 % Fixed

Putable January 29, 2024 Quarterly

10,000 December 4, 2028

1 unchanged sentence

Total FHLB long-term advances

January 2, 2024

January 5, 2024

155,000 2.89 %

60,000 January 2, 2024 5.44 % Fixed

20,000 January 2, 2024 5.45 % Fixed

20,000 January 5, 2024 5.48 % Fixed

20,500 January 8, 2024

4 unchanged sentences

27,500 February 20, 2024

February 27, 2024

March 13, 2024

27,000 February 27, 2024 5.42 % Fixed

24,500 March 13, 2024 5.39 % Fixed

23,500 December 29, 2024

Total FHLB short-term advances

309,000 5.37 %

Total FHLB advances

464,000 4.54 %

Short-Term Borrowings

Federal reserve bank

December 31, 2024

$ 145,000 December 31, 2024 4.83 % Fixed

Total Federal reserve bank

$ 145,000 4.83 %

Repurchase agreements

$ 2,054 N/A 8.20 % Variable

Total short-term borrowings

$ 147,054 4.88 %

Total borrowings

The short-term repurchase agreement represents the outstanding portion of a total $ 80.0 million commitment with two unrelated banks as of June 30, 2024 .

$ 611,054 4.62 %

The short-term repurchase agreement represents the outstanding portion of a total $ 50.0 million commitment with one unrelated banks as of September 30, 2024 .

The short-term repurchase agreement is utilized by Waterstone Mortgage Corporation to finance loans originated for sale.

1 unchanged sentence

Related interest rates are based upon the note rate associated with the loans being financed.

The short-term repurchase agreement had a $ 3.1 million balance at June 30, 2024 and a $ 2.1 million balance at December 31, 2023 .

The short-term repurchase agreement had a $ 827,000 balance at September 30, 2024 and a $ 2.1 million balance at December 31, 2023 .

The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities.

11 unchanged sentences

This would include all of the Company’s investment securities except municipal securities, private label bonds, and corporate bonds.

At June 30, 2024 , the Company had fully utilized its borrowing capacity under this program.

At September 30, 2024 , the Company had fully utilized its borrowing capacity under this program.

The program does not allow for additional funding capacity after March 11, 2024.

At June 30, 2024 , the Company had approximately $ 285.4 million in unused borrowing capacity at the FHLB.

At September 30, 2024 , the Company had approximately $ 362.5 million in unused borrowing capacity at the FHLB.

The Company selects loans that meet underwriting criteria established by the FHLB as collateral for outstanding advances.

The Company’s borrowings from the FHLB are limited to 76 % of the carrying value of unencumbered one - to four -family mortgage loans, 73 % of the carrying value of multi-family loans and 62 % of the carrying value of home equity loans.

In addition, these advances were collateralized by FHLB stock of $ 23.2 million at June 30, 2024 and $ 20.9 million at December 31, 2023 , respectively.

In addition, these advances were collateralized by FHLB stock of $ 21.7 million at September 30, 2024 and $ 20.9 million at December 31, 2023 , respectively.

In the event of prepayment, the Company is obligated to pay all remaining contractual interest on the advance.

18 unchanged sentences

The minimum capital conservation buffer is 2.5%.

As of June 30, 2024 , the Bank was considered well-capitalized, with all capital ratios exceeding the well-capitalized requirement.

As of September 30, 2024 , the Bank was considered well-capitalized, with all capital ratios exceeding the well-capitalized requirement.

There are no conditions or events that management believes have changed the Bank’s prompt corrective action capitalization category.

The Bank is subject to regulatory restrictions on the amount of dividends it may declare and pay to the Company without prior regulatory approval, and to regulatory notification requirements for dividends that do not require prior regulatory approval.

The actual and required capital amounts and ratios for the Bank as of June 30, 2024 and December 31, 2023 are presented in the tables below:

June 30, 2024

The actual and required capital amounts and ratios for the Bank as of September 30, 2024 and December 31, 2023 are presented in the tables below:

September 30, 2024

For Capital Adequacy Purposes

4 unchanged sentences

Consolidated Waterstone Financial, Inc.

$ 374,807 20.74 % $ 144,580 8.00 % $ 189,760 10.50 % N/A N/A

Waterstone Bank

359,791 19.91 % 144,570 8.00 % 189,740 10.50 % 180,709 10.00 %

Tier I Capital (to risk-weighted assets)

Consolidated Waterstone Financial, Inc.

355,637 19.68 % 108,440 6.00 % 153,620 8.50 % N/A N/A

Waterstone Bank

340,621 18.85 % 108,420 6.00 % 153,600 8.50 % 144,561 8.00 %

Common Equity Tier 1 Capital (to risk-weighted assets)

Consolidated Waterstone Financial, Inc.

355,637 19.68 % 81,330 4.50 % 126,510 7.00 % N/A N/A

Waterstone Bank

340,621 18.85 % 81,320 4.50 % 126,490 7.00 % 117,456 6.50 %

Tier I Capital (to average assets)

Consolidated Waterstone Financial, Inc.

355,637 15.62 % 91,070 4.00 % N/A N/A N/A N/A

Waterstone Bank

340,621 14.96 % 91,080 4.00 % N/A N/A 113,844 5.00 %

State of Wisconsin (to total assets)

Waterstone Bank

340,621 15.20 % 134,460 6.00 % N/A N/A N/A N/A

December 31, 2023

5 unchanged sentences

Consolidated Waterstone Financial, Inc.

$ 380,351 21.50 % $ 141,538 8.00 % $ 185,769 10.50 % N/A N/A

Waterstone Bank

355,476 20.10 % 141,515 8.00 % 185,738 10.50 % 176,893 10.00 %

Tier I capital (to risk-weighted assets)

Consolidated Waterstone Financial, Inc.

360,734 20.39 % 106,154 6.00 % 150,385 8.50 % N/A N/A

Waterstone Bank

335,859 18.99 % 106,117 6.00 % 150,332 8.50 % 141,489 8.00 %

Common Equity Tier 1 Capital (to risk-weighted assets)

Consolidated Waterstone Financial, Inc.

360,734 20.39 % 79,615 4.50 % 123,846 7.00 % N/A N/A

Waterstone Bank

335,859 18.99 % 79,587 4.50 % 123,803 7.00 % 114,960 6.50 %

Tier I Capital (to average assets)

Consolidated Waterstone Financial, Inc.

360,734 16.77 % 86,043 4.00 % N/A N/A N/A N/A

Waterstone Bank

335,859 15.62 % 86,007 4.00 % N/A N/A 107,509 5.00 %

State of Wisconsin (to total assets)

Waterstone Bank

335,859 15.20 % 132,576 6.00 % N/A N/A N/A N/A

Note 8 – Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities

3 unchanged sentences

The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

June 30, 2024

September 30, 2024

December 31, 2023

22 unchanged sentences

The Company holds mortgages on the underlying real estate as collateral supporting those commitments for which collateral is deemed necessary.

The Company has determined that there are no probable losses related to commitments to extend credit or the standby letters of credit as of June 30, 2024 and December 31, 2023 .

The Company has determined that there are no probable losses related to commitments to extend credit or the standby letters of credit as of September 30, 2024 and December 31, 2023 .

Please see Note 3 - Loans Receivable for discussion on the allowance for credit losses - unfunded commitments.

6 unchanged sentences

Given that the underlying loans delivered to buyers are predominantly conventional first lien mortgages, historical experience has resulted in insignificant losses and repurchase activity.

The Company's reserve for losses related to these recourse provisions totaled $ 2.1 million as of June 30, 2024 and $ 1.7 million as of December 31, 2023 .

The Company's reserve for losses related to these recourse provisions totaled $ 1.9 million as of September 30, 2024 and $ 2.1 million as of December 31, 2023 .

In the normal course of business, the Company, or its subsidiaries, are involved in various legal proceedings.

30 unchanged sentences

The following tables presents the outstanding notional balances and fair values of outstanding derivative instruments:

June 30, 2024

September 30, 2024

Derivatives not designated as Hedging Instruments

39 unchanged sentences

Commercial borrower swaps are completed independently with each borrower and are not subject to master netting arrangements.

As of June 30, 2024 and December 31, 2023 , no back-to-back swaps were in default.

As of September 30, 2024 and December 31, 2023 , no back-to-back swaps were in default.

The Company pays fixed rates and receives floating rates based upon LIBOR on the swaps with dealer counterparties.

Dealer counterparty swaps are subject to master netting agreements among the contracts within our Bank.

No right of offset existed with dealer counterparty swaps as of June 30, 2024 and December 31, 2023 .

No right of offset existed with dealer counterparty swaps as of September 30, 2024 and December 31, 2023 .

All changes in the fair value of these instruments are recorded in other non-interest income.

The Company pledged no cash at June 30, 2024 and at December 31, 2023 .

The Company pledged no cash at September 30, 2024 and at December 31, 2023 .

Note 10 – Earnings Per Share

2 unchanged sentences

Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding adjusted for the dilutive effect of all potential common shares.

There were 539,000 and 194,000 antidilutive shares of common stock for the three months ended June 30, 2024 and 2023 , respectively.

There were 539,000 and 181,000 antidilutive shares of common stock for the six months ended June 30, 2024 and 2023 , respectively.

There were 183,000 and 199,000 antidilutive shares of common stock for the three months ended September 30, 2024 and 2023 , respectively.

There were 206,000 and 162,000 antidilutive shares of common stock for the nine months ended September 30, 2024 and 2023 , respectively.

Presented below are the calculations for basic and diluted earnings per share:

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(In Thousands, except per share amounts)

$ 4,728 $ 3,253 $ 13,478 $ 9,415

Weighted average shares outstanding

18,350 19,998 18,631 20,420

Effect of dilutive potential common shares

Diluted weighted average shares outstanding

$ 18,445 $ 20,022 $ 18,677 $ 20,473

Basic earnings per share

$ 0.26 $ 0.16 $ 0.72 $ 0.46

Diluted earnings per share

$ 0.26 $ 0.16 $ 0.72 $ 0.46

Note 11 – Fair Value Measurements

10 unchanged sentences

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The following table presents information about our assets recorded in the consolidated statements of financial condition at their fair value on a recurring basis as of June 30, 2024 and December 31, 2023 , and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

The following table presents information about our assets recorded in the consolidated statements of financial condition at their fair value on a recurring basis as of September 30, 2024 and December 31, 2023 , and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

Fair Value Measurements Using

June 30, 2024

September 30, 2024

(In Thousands)

16 unchanged sentences

Mortgage banking derivative assets

1,281 - - 1,281

Interest rate swap assets

57 unchanged sentences

The table below presents reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3 ) during 2024 and 2023 .

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(In Thousands)

2 unchanged sentences

$ 1,164 $ 2,504 $ ( 30 ) $ ( 994 )

Mortgage derivative gain (loss), net

Mortgage derivative (loss) gain, net

( 252 ) 372 942 3,870

3 unchanged sentences

Assets Recorded at Fair Value on a Non-recurring Basis

The following tables present information about assets recorded in the consolidated statements of financial condition at their fair value on a non-recurring basis as of June 30, 2024 and December 31, 2023 , and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value.

The following tables present information about assets recorded in the consolidated statements of financial condition at their fair value on a non-recurring basis as of September 30, 2024 and December 31, 2023 , and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value.

Fair Value Measurements Using

June 30, 2024

September 30, 2024

(In Thousands)

1 unchanged sentence

$ 145 $ - $ - $ 145

Impaired mortgage servicing rights

Fair Value Measurements Using

15 unchanged sentences

The Company records the mortgage servicing rights at the lower of amortized cost or fair value.

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of June 30, 2024 and December 31, 2023 , the significant unobservable inputs used in the fair value measurements were as follows:

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2024 and December 31, 2023 , the significant unobservable inputs used in the fair value measurements were as follows:

Significant Unobservable Input Value

Fair Value at Significant

September 30,

(Dollars in Thousands)

7 unchanged sentences

34.8 % 34.8 % 34.8 %

Mortgage servicing rights

432 Pricing models

Prepayment rate

6.5 % 30.7 % 21.3 %

Discount rate

10.5 % 14.9 % 10.8 %

Cost to service

$ 83 $ 183 $ 86

Mortgage banking derivatives

22 unchanged sentences

The carrying amounts and fair values of the Company’s financial instruments consist of the following:

June 30, 2024

September 30, 2024

December 31, 2023

38 unchanged sentences

Fair values for the Company’s commitments to extend credit and standby letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the counterparty’s credit standing, and discounted cash flow analyses.

The fair value of the Company’s commitments to extend credit was not material at June 30, 2024 and December 31, 2023 .

The fair value of the Company’s commitments to extend credit was not material at September 30, 2024 and December 31, 2023 .

Note 12 – Segment Reporting

20 unchanged sentences

Presented below is the segment information:

As of or for the three months ended June 30, 2024

As of or for the three months ended September 30, 2024

(In Thousands)

27 unchanged sentences

941 194 23 1,158

Net income (loss)

$ 4,705 $ ( 50 ) $ 73 $ 4,728

$ 2,472,126 $ 193,726 $ ( 421,516 ) $ 2,244,336

As of or for the three months ended June 30, 2023

As of or for the three months ended September 30, 2023

(In Thousands)

29 unchanged sentences

$ 2,181,155 $ 202,785 $ ( 162,582 ) $ 2,221,358

As of or for the six months ended June 30, 2024

As of or for the nine months ended September 30, 2024

(In Thousands)

30 unchanged sentences

$ 11,694 $ 1,561 $ 223 $ 13,478

As of or for the six months ended June 30, 2023

As of or for the nine months ended September 30, 2023

(In Thousands)

77 unchanged sentences

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, 2024 and 2023 and the financial condition as of June 30, 2024 compared to the financial condition as of December 31, 2023.

The detailed discussion in the sections below focuses on the results of operations for the three and nine months ended September 30, 2024 and 2023 and the financial condition as of September 30, 2024 compared to the financial condition as of December 31, 2023.

As described in the notes to the unaudited consolidated financial statements, we have two reportable segments:

6 unchanged sentences

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, 2024 and 2023, which focuses on noninterest income and 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, 2024 and 2023, 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.

Significant Items

There were no significant items that impacted earnings for the three and six months ended June 30, 2024 and 2023.

Comparison of Community Banking Segment Results of Operations for the Three Months Ended June 30, 2024 and 2023

Net income totaled $4.3 million for the three months ended June 30, 2024 compared to $5.2 million for the three months ended June 30, 2023.

Net interest income decreased $2.0 million to $11.2 million for the three months ended June 30, 2024 compared to $13.2 million for the three months ended June 30, 2023.

There were no significant items that impacted earnings for the three and nine months ended September 30, 2024 and 2023.

Comparison of Community Banking Segment Results of Operations for the Three Months Ended September 30, 2024 and 2023

Net income totaled $4.7 million for the three months ended September 30, 2024 compared to $4.5 million for the three months ended September 30, 2023.

Net interest income decreased $181,000 to $12.3 million for the three months ended September 30, 2024 compared to $12.4 million for the three months ended September 30, 2023.

Interest expense on deposits and borrowings increased $3.4 million as replacement rates increased in the rising interest rate environment.

Offsetting the increase in interest expense on deposit and borrowings, interest income on loans increased $3.2 million as replacement rates and average loans held for investment balances were higher than in the prior year and interest income on debt securities, federal funds sold and short-term investments increased due to the increase in the average balance and replacement rates.

There was a negative provision for credit losses of $279,000 for the three months ended June 30, 2024 compared to a provision for credit losses of $158,000 for the three months ended June 30, 2023.

The negative provision for credit losses of $279,000 consisted of a $197,000 negative provision related to loans and $82,000 negative provision related to unfunded commitments for the three months ended June 30, 2024.

During the three months ended June 30, 2024, the decrease related to loans was primarily due to adjustments in the qualitative factors related to single-family loans during the quarter offset by an increases to qualitative factors in our commercial real estate portfolio and the decrease in provision related to unfunded commitments was primarily due to a decrease in the loans that are currently waiting to be funded compared to the prior quarter end.

There was a negative provision for credit losses of $302,000 for the three months ended September 30, 2024 compared to a provision for credit losses of $445,000 for the three months ended September 30, 2023.

The negative provision for credit losses of $302,000 consisted of a $218,000 negative provision related to loans and $84,000 negative provision related to unfunded commitments for the three months ended September 30, 2024.

During the three months ended September 30, 2024, the current quarter decrease was primarily due to a decrease in historical loss rates, net recoveries for the period, and improvements in certain internal asset quality metrics offset by an adjustment in the qualitative factors primarily related to increases in economic risks related to commercial real estate loans during the quarter.

The negative provision for credit losses related to unfunded loan commitments was $84,000 for the quarter ended September 30, 2024 compared to a provision for credit losses related to unfunded loan commitments of $239,000 for the quarter ended September 30, 2023.

The negative provision for credit losses related to unfunded loan commitments for the quarter ended September 30, 2024 was due primarily to a decrease of loans that are currently waiting to be funded 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.

Compensation, payroll taxes, and other employee benefits expense increased $433,000 to $5.1 million compared to the quarter ending June 30, 2023 primarily due to an increase in health insurance expense as claims increased.

Compensation, payroll taxes, and other employee benefits expense increased $708,000 to $5.3 million compared to the quarter ending September 30, 2023 primarily due to an increase in health insurance expense as claims increased.

Other noninterest expense decreased $101,000 to $602,000 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.

Comparison of Mortgage Banking Segment Results of Operations for the Three Months Ended June 30, 2024 and 2023

Net income totaled $1.3 million for the three months ended June 30, 2024 compared to net loss of $1.2 million for the three months ended June 30, 2023.

We originated $634.1 million in mortgage loans held for sale (including sales to the community banking segment) during the three months ended June 30, 2024, which represents an increase of $10.8 million, or 1.7%, from the $623.3 million originated during the three months ended June 30, 2023.

The increase in loan production volume was driven by a $23.9 million, or 106.3%, increase in refinance products and was offset by a $13.1 million decrease in purchase products as real estate inventory levels continue to be at low levels.

Total mortgage banking noninterest income increased $2.0 million, or 8.9%, to $25.1 million during the three months ended June 30, 2024 compared to $23.0 million during the three months ended June 30, 2023.

The increase in mortgage banking noninterest income was related to a 1.7% increase in volume and a 5.4% increase in gross margin on loans originated and sold for the three months ended June 30, 2024 compared to June 30, 2023.

Comparison of Mortgage Banking Segment Results of Operations for the Three Months Ended September 30, 2024 and 2023

Net loss totaled $50,000 for the three months ended September 30, 2024 compared to net loss of $1.4 million for the three months ended September 30, 2023.

We originated $558.7 million in mortgage loans held for sale (including sales to the community banking segment) during the three months ended September 30, 2024, which represents a decrease of $38.8 million, or 6.5%, from the $597.6 million originated during the three months ended September 30, 2023.

The decrease in loan production volume was driven by a $73.4 million, or 12.9%, decrease in purchase products and was offset by a $34.5 million increase in refinance products.

Total mortgage banking noninterest income decreased $66,000, or 0.3%, to $21.4 million during the three months ended September 30, 2024 compared to $21.5 million during the three months ended September 30, 2023.

The decrease in mortgage banking noninterest income was related to a 6.5% decrease in volume offset by a 5.9% increase in gross margin on loans originated and sold for the three months ended September 30, 2024 compared to September 30, 2023.

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.

5 unchanged sentences

Department of Agriculture loan.

Loans originated for the purchase of a residential property comprised 92.7% of total originations during the three months ended June 30, 2024, compared to 96.4% of total originations during the three months ended June 30, 2023, respectively.

The mix of loan type trended towards more conventional loans and less governmental loans, with governmental loans and conventional loans comprising 35.4% and 64.6% of all loan originations, respectively, during the three months ended June 30, 2024, compared to 38.7% and 61.3% of all loan originations, respectively, during the three months ended June 30, 2023.

During the quarter ended June 30, 2024, the Company sold mortgage servicing rights related to $233.1 million in loans serviced for third parties.

The sale generated $2.1 million in net proceeds on a mortgage servicing rights book value of $2.0 million and resulted in a $152,000 gain during the three months ended June 30, 2024.

There were no comparable sales during the three months ended June 30, 2023.

As of June 30, 2024 and June 30, 2023, the Company maintained servicing rights related to $43.8 million and $156.3 million, respectively, in loans previously sold to third parties.

Total compensation, payroll taxes and other employee benefits decreased $1.0 million, or 5.8%, to $16.9 million for the three months ended June 30, 2024 compared to $17.9 million for the three months ended June 30, 2023.

The decrease in compensation expense was primarily related to decreased salaries driven by a reduction in headcount and health insurance expense offset by loan production commissions and bonus accruals.

Loans originated for the purchase of a residential property comprised 88.9% of total originations during the three months ended September 30, 2024, compared to 95.4% of total originations during the three months ended September 30, 2023, respectively.

The mix of loan type trended towards more conventional loans and less governmental loans, with governmental loans and conventional loans comprising 35.2% and 64.8% of all loan originations, respectively, during the three months ended September 30, 2024, compared to 39.2% and 60.8% of all loan originations, respectively, during the three months ended September 30, 2023.

Total compensation, payroll taxes and other employee benefits decreased $1.3 million, or 7.3%, to $15.9 million for the three months ended September 30, 2024 compared to $17.2 million for the three months ended September 30, 2023.

The decrease primarily related to decreased salary expense and incentives expense driven by reduced employee headcount and a decrease in new branches added over the past year.

Consolidated Waterstone Financial, Inc.

Results of Operations

Three months ended June 30,

Three months ended September 30,

(Dollars In Thousands, except per share amounts)

9 unchanged sentences

Yields on interest-earning assets are computed on a fully tax-equivalent yield, where applicable.

Three months ended June 30,

Three months ended September 30,

Average Balance

28 unchanged sentences

Average interest-earning assets to average interest-bearing liabilities

Interest income includes net deferred loan fee amortization income of $166,000 and $143,000 for the three months ended June 30, 2024 and 2023, respectively.

Interest income includes net deferred loan fee amortization income of $168,000 and $179,000 for the three months ended September 30, 2024 and 2023, respectively.

Average balance of mortgage related and debt securities are based on amortized historical cost.

Interest income from tax-exempt securities is computed on a taxable equivalent basis using a tax rate of 21% for the three months ended June 30, 2024 and 2023.

The yields on debt securities, federal funds sold and short-term investments before tax-equivalent adjustments were 4.82% and 3.67% for the three months ended June 30, 2024 and 2023, respectively.

Interest income from tax-exempt securities is computed on a taxable equivalent basis using a tax rate of 21% for the three months ended September 30, 2024 and 2023.

The yields on debt securities, federal funds sold and short-term investments before tax-equivalent adjustments were 5.05% and 4.45% for the three months ended September 30, 2024 and 2023, respectively.

Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities and is presented on a fully tax equivalent basis.

7 unchanged sentences

For purposes of this table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionately based on the changes due to rate and the changes due to volume.

Three months ended June 30,

Three months ended September 30,

2024 versus 2023

14 unchanged sentences

______________

Interest income includes net deferred loan fee amortization income of $166,000 and $143,000 for the three months ended June 30, 2024 and 2023, respectively.

Interest income includes net deferred loan fee amortization income of $168,000 and $179,000 for the three months ended September 30, 2024 and 2023, respectively.

Non-accrual loans have been included in average loans receivable balance.

1 unchanged sentence

Average balance of available for sale securities is based on amortized historical cost.

Interest income from tax exempt securities is computed on a taxable equivalent basis using a tax rate of 21% for the three months ended June 30, 2024 and June 30, 2023.

Net interest income decreased $2.0 million, or 15.7%, to $10.7 million during the three months ended June 30, 2024 compared to $12.7 million during the three months ended June 30, 2023 primarily due to the increased cost of funds as a result of the rising interest rate environment.

Interest income from tax exempt securities is computed on a taxable equivalent basis using a tax rate of 21% for the three months ended September 30, 2024 and September 30, 2023.

Net interest income decreased $472,000, or 3.9%, to $11.5 million during the three months ended September 30, 2024 compared to $12.0 million during the three months ended September 30, 2023 primarily due to the increased cost of funds as a result of the rising interest rate environment.

Interest income on loans increased $2.8 million, or 11.6%, to $26.6 million due primarily to a 39 basis point increase in average yield on loans as interest rates continued to increase over the past year and an increase in average loan balance as loans held for investment increased.

4 unchanged sentences

Partially offsetting the increase in average cost, the average balance decreased $2.7 million.

Interest expense on borrowings increased $2.0 million, or 35.7%, to $7.6 million due to a 84 basis point increase in the cost of borrowings during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 as we transitioned to more short-term fundings.

Additionally, the average balance increased $71.2 million to $622.8 million during the three months ended June 30, 2024, compared to $551.6 million during the three months ended June 30, 2023.

Interest expense on borrowings increased $251,000, or 3.6%, to $7.2 million due to a six basis point increase in the cost of borrowings during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 as we transitioned to more short-term fundings.

Additionally, the average balance increased $15.8 million to $600.6 million during the three months ended September 30, 2024, compared to $584.8 million during the three months ended September 30, 2023.

Provision for Credit Losses

There was a negative provision for credit losses of $225,000 for the three months ended June 30, 2024 compared to a $186,000 provision for credit losses for the three months ended June 30, 2023.

The $225,000 negative provision for credit losses consisted of a $143,000 negative provision related to loans and a negative provision related to unfunded commitments of $82,000 for the three months ended June 30, 2024.

During the three months ended June 30, 2024, the decrease related to loans was primarily due to a decrease in originations and historical losses used in the calculation and the decrease in provision related to unfunded commitments was primarily due to an decrease in the loans yet to be funded.

There was a negative provision for credit losses of $377,000 for the three months ended September 30, 2024 compared to a $445,000 provision for credit losses for the three months ended September 30, 2023.

The $377,000 negative provision for credit losses consisted of a $293,000 negative provision related to loans and a negative provision related to unfunded commitments of $84,000 for the three months ended September 30, 2024.

During the three months ended September 30, 2024, the decrease related to loans was primarily due to a recovery, a decrease in historical losses used in the calculation, and an improvement in certain asset quality metrics.

The decrease in provision related to unfunded commitments was primarily due to an decrease in the construction loans yet to be funded.

We made adjustments to our qualitative factors, primarily to account for the changes in internal metrics and external risk factors.

3 unchanged sentences

Noninterest Income

Three months ended June 30,

Three months ended September 30,

(Dollars In Thousands)

3 unchanged sentences

Total noninterest income

Total noninterest income increased $3.0 million, or 12.6%, to $26.5 million during the three months ended June 30, 2024 compared to $23.5 million during the three months ended June 30, 2023.

The increase resulted primarily from increase in mortgage banking noninterest income.

The increase in mortgage banking income was primarily the result of a increase in loan origination volume and gross margin on loans originated and sold.

Total noninterest income increased $322,000, or 1.4%, to $22.6 million during the three months ended September 30, 2024 compared to $22.2 million during the three months ended September 30, 2023.

The increase in mortgage banking income was primarily the result of a increase in gross margin on loans originated and sold offset by a decrease in loan origination volumes.

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.

Total loan origination volume on a consolidated basis increased $67.1 million, or 11.9%, to $629.2 million during the three months ended June 30, 2024 compared to $562.1 million during the three months ended June 30, 2023.

Gross margin on loans originated and sold increased 5.9% at the mortgage banking segment.

See "Comparison of Mortgage Banking Segment Results of Operations for the Three Months Ended June 30, 2024 and 2023" above for additional discussion of the decrease in mortgage banking income.

The increase in other noninterest income was due primarily to an increase in gain on sale of mortgage servicing rights.

During the quarter ended June 30, 2024, the Company sold mortgage servicing rights related to $233.1 million in loans serviced for third parties.

The sale generated $2.1 million in net proceeds on a mortgage servicing rights book value of $2.0 million and resulted in a $152,000 gain during the three months ended June 30, 2024.

There were no comparable sales during the three months ended June 30, 2023.

As of June 30, 2024 and June 30, 2023, the Company maintained servicing rights related to $43.8 million and $156.3 million, respectively, in loans previously sold to third parties.

Three months ended June 30,

See "Comparison of Mortgage Banking Segment Results of Operations for the Three Months Ended September 30, 2024 and 2023" above for additional discussion of the increase in mortgage banking income.

Total loan origination volume on a consolidated basis decreased $42.6 million, or 7.1%, to $555.5 million during the three months ended September 30, 2024 compared to $598.1 million during the three months ended September 30, 2023.

Three months ended September 30,

(Dollars In Thousands)

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Total noninterest expenses

Total noninterest expenses decreased $663,000, or 2.1%, to $30.3 million during the three months ended June 30, 2024 compared to $30.9 million during the three months ended June 30, 2023.

Compensation, payroll taxes and other employee benefits expense at our mortgage banking segment decreased $1.0 million, or 5.8%, to $16.9 million during the three months ended June 30, 2024.

Compensation, payroll taxes and other employee benefits expense at the community banking segment increased $433,000, or 9.2%, to $5.1 million during the three months ended June 30, 2024.

Total noninterest expenses decreased $1.5 million, or 4.9%, to $28.6 million during the three months ended September 30, 2024 compared to $30.0 million during the three months ended September 30, 2023.

Compensation, payroll taxes and other employee benefits expense at our mortgage banking segment decreased $1.3 million, or 7.3%, to $15.9 million during the three months ended September 30, 2024.

The decrease primarily related to decreased salary expense and incentives expense driven by reduced employee headcount and a decrease in new branches added over the past year

Compensation, payroll taxes and other employee benefits expense at the community banking segment increased $708,000, or 15.3%, to $5.3 million during the three months ended September 30, 2024.

The increase was primarily due to an increase in health insurance expense as claims increased.

Occupancy, office furniture and equipment expense at the mortgage banking segment decreased $127,000 to $1.0 million during the three months ended June 30, 2024, primarily resulting from decreased rent expenses as underperforming branches were closed over the past year.

Occupancy, office furniture and equipment expense at the community banking segment increased $110,000 to $983,000 during the three months ended June 30, 2024.

The increase was due primarily to increases in repairs and maintenance expenses.

Advertising expense increased $43,000, or 4.6%, to $987,000 during the three months ended June 30, 2024.

The increase was primarily due to advertising expenses at the mortgage banking segment due to the increased activity in the mortgage industry.

Data processing expense increased $152,000, or 13.9%, to $1.2 million during the three months ended June 30, 2024.

The increases at the community banking and mortgage banking segments were due to additional investments in technology.

Professional fees increased $140,000 to $758,000 during the three months ended June 30, 2024.

The increase related to an increase in legal fees at the mortgage banking segment.

Occupancy, office furniture and equipment expense at the mortgage banking segment decreased $188,000 to $953,000 during the three months ended September 30, 2024, primarily resulting from decreased rent and depreciation expenses as underperforming branches were closed over the past year.

Occupancy, office furniture and equipment expense at the community banking segment increased $52,000 to $904,000 during the three months ended September 30, 2024.

The increase was due primarily to increases related to new equipment expenses.

Professional fees decreased $176,000 to $569,000 during the three months ended September 30, 2024.

The decrease related to a decrease in legal fees at the mortgage banking segment related to a complaint.

In July 2022, a complaint was filed by Mutual of Omaha Mortgage, Inc.

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Given the current stage of the litigation, the Company is not yet able to make a determination as to the likelihood of an unfavorable outcome in this matter, nor is it able to estimate the range of any possible loss.

Other noninterest expense decreased $292,000, or 10.9%, to $2.4 million during the three months ended June 30, 2024.

The decrease primarily related to decreased branch overhead and provision for loan sale losses at the mortgage banking segment.

Income tax expense totaled $1.4 million for the three months ended June 30, 2024 compared to $1.1 million during the three months ended June 30, 2023.

Income tax expense was recognized on the statement of income during the three months ended June 30, 2024 at an effective rate of 20.0% of pretax income and during the three months ended June 30, 2023 at an effective rate of 21.3% of pretax income.

Comparison of Community Banking Segment Results of Operations for the Six Months Ended June 30, 2024 and 2023

Net income totaled $7.0 million for the six months ended June 30, 2024 compared to $10.0 million for the six months ended June 30, 2023.

Net interest income decreased $4.4 million to $22.8 million for the six months ended June 30, 2024 compared to $27.2 million for the six months ended June 30, 2023.

Other noninterest expense decreased $619,000, or 24.0%, to $2.0 million during the three months ended September 30, 2024.

The decrease primarily related to decreased provision for branch losses and provision for loan sale losses at the mortgage banking segment.

Income tax expense totaled $1.2 million for the three months ended September 30, 2024 compared to $500,000 during the three months ended September 30, 2023.

Income tax expense was recognized on the statement of income during the three months ended September 30, 2024 at an effective rate of 19.7% of pretax income and during the three months ended September 30, 2023 at an effective rate of 13.3% of pretax income.

The increase in the effective rate related to a decrease in pre-tax income during the three months ended September 30, 2023.

Comparison of Community Banking Segment Results of Operations for the Nine Months Ended September 30, 2024 and 2023

Net income totaled $11.7 million for the nine months ended September 30, 2024 compared to $14.6 million for the nine months ended September 30, 2023.

Net interest income decreased $4.6 million to $35.1 million for the nine months ended September 30, 2024 compared to $39.7 million for the nine months ended September 30, 2023.

Interest expense on deposits and borrowings increased $17.2 million as replacement rates increased in the rising interest rate environment.

Offsetting the increase in interest expense on deposit and borrowings, interest income on loans increased $11.8 million as replacement rates and average loans held for investment balances were higher than in the prior year.

There was a negative provision for credit losses of $174,000 for the six months ended June 30, 2024 compared to a provision for credit losses of $546,000 for the six months ended June 30, 2023.

The negative provision for credit losses of $174,000 consisted of a $162,000 negative provision related to loans and $12,000 negative provision related to unfunded commitments for the six months ended June 30, 2024.

During the six months ended June 30, 2024, the decrease related to loans was primarily due to decreases in historical loss rates and loan originations offset by adjustments in the qualitative factors related to increases in treasury interest rates during the quarter.

There was a negative provision for credit losses of $476,000 for the nine months ended September 30, 2024 compared to a provision for credit losses of $991,000 for the nine months ended September 30, 2023.

The negative provision for credit losses of $476,000 consisted of a $380,000 negative provision related to loans and $96,000 negative provision related to unfunded commitments for the nine months ended September 30, 2024.

During the nine months ended September 30, 2024, the decrease related to loans was primarily due to decreases in historical loss rates and loan originations.

The decrease in provision related to unfunded commitments was primarily due to an decrease in the loans that are currently waiting to be funded compared to the prior quarter end.

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The forecast factor remained unchanged as we monitor the economic environment going forward.

Compensation, payroll taxes, and other employee benefits expense increased $625,000 to $10.5 million compared to the quarter ending June 30, 2023 primarily due to an increase in health insurance expense as claims increased.

Compensation, payroll taxes, and other employee benefits expense increased $1.3 million to $15.8 million compared to the quarter ending September 30, 2023 primarily due to an increase in health insurance expense as claims increased.

Other noninterest expense decreased $1.3 million to $2.0 million 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.

Comparison of Mortgage Banking Segment Results of Operations for the Six Months Ended June 30, 2024 and 2023

Net income totaled $1.6 million for the six months ended June 30, 2024 compared to net loss of $4.0 million for the six months ended June 30, 2023.

We originated $1.12 billion in mortgage loans held for sale (including sales to the community banking segment) during the six months ended June 30, 2024, which represents an increase of $53.2 million, or 5.0%, from the $1.07 billion originated during the six months ended June 30, 2023.

The increase in loan production volume was driven by a $10.9 million, or 1.1%, increase in purchase products and a $33.8 million increase in refinance products as mortgage rates decreased to start the year and average inventory levels have increased.

Total mortgage banking noninterest income increased $4.4 million, or 10.8%, to $45.4 million during the six months ended June 30, 2024 compared to $41.0 million during the six months ended June 30, 2023.

The increase in mortgage banking noninterest income was related to a 5.0% increase in volume and by a 6.8% increase in gross margin on loans originated and sold for the six months ended June 30, 2024 compared to June 30, 2023.

Comparison of Mortgage Banking Segment Results of Operations for the Nine Months Ended September 30, 2024 and 2023

Net income totaled $1.6 million for the nine months ended September 30, 2024 compared to net loss of $5.4 million for the nine months ended September 30, 2023.

We originated $1.68 billion in mortgage loans held for sale (including sales to the community banking segment) during the nine months ended September 30, 2024, which represents an increase of $14.3 million, or 0.9%, from the $1.66 billion originated during the nine months ended September 30, 2023.

The increase in loan production volume was driven by a $75.2 million increase in refinance products as mortgage rates decreased to start the year offset by a $62.5 million , or 3.9%, decrease in purchase products.

Total mortgage banking noninterest income increased $4.4 million, or 7.0%, to $66.8 million during the nine months ended September 30, 2024 compared to $62.4 million during the nine months ended September 30, 2023.

The increase in mortgage banking noninterest income was related to a 0.9% increase in volume and by a 6.6% increase in gross margin on loans originated and sold for the nine months ended September 30, 2024 compared to September 30, 2023.

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.

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Department of Agriculture loan.

Loans originated for the purchase of a residential property comprised 91.8% of total originations during the six months ended June 30, 2024, compared to 96.5% of total originations during the six months ended June 30, 2023, respectively.

The mix of loan type trended towards less conventional loans and more governmental loans, with governmental loans and conventional loans comprising 36.7% and 63.3% of all loan originations, respectively, during the six months ended June 30, 2024, compared to 37.2% and 62.8% of all loan originations, respectively, during the six months ended June 30, 2023.

Loans originated for the purchase of a residential property comprised 90.9% of total originations during the nine months ended September 30, 2024, compared to 96.1% of total originations during the nine months ended September 30, 2023, respectively.

The mix of loan type trended towards more conventional loans and less governmental loans, with governmental loans and conventional loans comprising 36.3% and 63.7% of all loan originations, respectively, during the nine months ended September 30, 2024, compared to 37.9% and 62.1% of all loan originations, respectively, during the nine months ended September 30, 2023.

The decrease in other noninterest income was due primarily to a decrease in gain on sale of mortgage servicing rights.

During the six months ended June 30, 2024, the Company sold mortgage servicing rights related to $233.1 million in loans serviced for third parties.

The sale generated $2.1 million in net proceeds on a mortgage servicing rights book value of $2.0 million and resulted in a $152,000 gain during the six months ended June 30, 2024.

During the six months ended June 30, 2023, the Company sold mortgage servicing rights related to $318.4 million in loans serviced for third parties.

During the nine months ended September 30, 2024, the Company sold mortgage servicing rights related to $233.1 million in loans serviced for third parties.

The sale generated $2.1 million in net proceeds on a mortgage servicing rights book value of $2.0 million and resulted in a $152,000 gain during the nine months ended September 30, 2024.

During the nine months ended September 30, 2023, the Company sold mortgage servicing rights related to $318.4 million in loans serviced for third parties.

The sale generated $3.5 million in net proceeds and a $583,000 gain.

Total compensation, payroll taxes and other employee benefits decreased $1.4 million, or 4.2%, to $31.6 million for the six months ended June 30, 2024 compared to $33.0 million for the six months ended June 30, 2023.

Total compensation, payroll taxes and other employee benefits decreased $2.6 million, or 5.3%, to $47.6 million for the nine months ended September 30, 2024 compared to $50.2 million for the nine months ended September 30, 2023.

The decrease in compensation expense was primarily related to decreased salaries driven by a reduction in headcount, sign on incentives, and health insurance expense offset by loan production commissions and branch manager pay.

Consolidated Waterstone Financial, Inc.

Results of Operations

Six months ended June 30,

Nine months ended September 30,

(Dollars In Thousands, except per share amounts)

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Yields on interest-earning assets are computed on a fully tax-equivalent yield, where applicable.

Six months ended June 30,

Nine months ended September 30,

Average Balance

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Average interest-earning assets to average interest-bearing liabilities

Interest income includes net deferred loan fee amortization income of $317,000 and $295,000 for the six months ended June 30, 2024 and 2023, respectively.

Interest income includes net deferred loan fee amortization income of $486,000 and $474,000 for the nine months ended September 30, 2024 and 2023, respectively.

Average balance of mortgage related and debt securities are based on amortized historical cost.

Interest income from tax-exempt securities is computed on a taxable equivalent basis using a tax rate of 21% for the six months ended June 30, 2024 and 2023.

The yields on debt securities, federal funds sold and short-term investments before tax-equivalent adjustments were 4.82% and 3.69% for the six months ended June 30, 2024 and 2023, respectively.

Interest income from tax-exempt securities is computed on a taxable equivalent basis using a tax rate of 21% for the nine months ended September 30, 2024 and 2023.

The yields on debt securities, federal funds sold and short-term investments before tax-equivalent adjustments were 4.90% and 3.97% for the nine months ended September 30, 2024 and 2023, respectively.

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Six months ended June 30,

Nine months ended September 30,

2024 versus 2023

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_____________

Interest income includes net deferred loan fee amortization income of $317,000 and $295,000 for the six months ended June 30, 2024 and 2023, respectively.

Interest income includes net deferred loan fee amortization income of $486,000 and $474,000 for the nine months ended September 30, 2024 and 2023, respectively.

Non-accrual loans have been included in average loans receivable balance.

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Average balance of available for sale securities is based on amortized historical cost.

Interest income from tax exempt securities is computed on a taxable equivalent basis using a tax rate of 21% for the six months ended June 30, 2024 and June 30, 2023.

Net interest income decreased $4.7 million, or 17.6%, to $21.8 million during the six months ended June 30, 2024 compared to $26.5 million during the six months ended June 30, 2023 primarily due to the increased cost of funds as a result of the rising interest rate environment.

Interest income from tax exempt securities is computed on a taxable equivalent basis using a tax rate of 21% for the nine months ended September 30, 2024 and September 30, 2023.

Net interest income decreased $5.1 million, or 13.3%, to $33.3 million during the nine months ended September 30, 2024 compared to $38.5 million during the nine months ended September 30, 2023 primarily due to the increased cost of funds as a result of the rising interest rate environment.

Interest income on loans increased $10.8 million, or 16.4%, to $76.7 million due primarily to a 48 basis point increase in average yield on loans as interest rates continued to increase over the past year and an increase in average loan balance as loans held for investment increased.

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Partially offsetting the increase in average cost, the average balance decreased $18.5 million.

Interest expense on borrowings increased $4.8 million, or 49.9%, to $14.4 million due to a 82 basis point increase in the cost of borrowings during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 as we transitioned to more short-term fundings.

Additionally, the average balance increased $115.8 million to $612.7 million during the six months ended June 30, 2024, compared to $496.9 million during the six months ended June 30, 2023.

Interest expense on borrowings increased $5.1 million, or 30.5%, to $21.6 million due to a 53 basis point increase in the cost of borrowings during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 as we transitioned to more short-term fundings.

Additionally, the average balance increased $82.1 million to $608.7 million during the nine months ended September 30, 2024, compared to $526.5 million during the nine months ended September 30, 2023.

Provision for Credit Losses

There was a negative provision for credit losses of $158,000 for the six months ended June 30, 2024 compared to a $646,000 provision for credit losses for the six months ended June 30, 2023.

The $158,000 negative provision for credit losses consisted of a $146,000 negative provision related to loans and a negative provision related to unfunded commitments of $12,000 for the six months ended June 30, 2024.

During the six months ended June 30, 2024, the decrease related to loans was primarily due to a decrease in originations and historical losses used in the calculation and the decrease in provision related to unfunded commitments was primarily due to a decrease in the loans yet to be funded.

There was a negative provision for credit losses of $535,000 for the nine months ended September 30, 2024 compared to a $1.1 million provision for credit losses for the nine months ended September 30, 2023.

The $535,000 negative provision for credit losses consisted of a $439,000 negative provision related to loans and a negative provision related to unfunded commitments of $96,000 for the nine months ended September 30, 2024.

During the nine months ended September 30, 2024, the decrease related to loans was primarily due to a decrease in originations and historical losses used in the calculation and the decrease in provision related to unfunded commitments was primarily due to a decrease in the loans yet to be funded.

We made adjustments to our qualitative factors, primarily to account for the changes in internal metrics and external risk factors.

3 unchanged sentences

Noninterest Income

Six months ended June 30,

Nine months ended September 30,

(Dollars In Thousands)

3 unchanged sentences

Total noninterest income

Total noninterest income increased $5.7 million, or 13.5% to $47.7 million during the six months ended June 30, 2024 compared to $42.1 million during the six months ended June 30, 2023.

Total noninterest income increased $6.0 million, or 9.3% to $70.3 million during the nine months ended September 30, 2024 compared to $64.3 million during the nine months ended September 30, 2023.

The increase resulted primarily from increase in mortgage banking noninterest income offset by a decrease in other income.

1 unchanged sentence

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.

Total loan origination volume on a consolidated basis increased $129.1 million, or 13.2%, to $1.11 billion during the six months ended June 30, 2024 compared to $977.8 million during the six months ended June 30, 2023.

Total loan origination volume on a consolidated basis increased $86.5 million, or 5.5%, to $1.66 billion during the nine months ended September 30, 2024 compared to $1.58 billion during the nine months ended September 30, 2023.

Gross margin on loans originated and sold increased 6.6% at the mortgage banking segment.

See "Comparison of Mortgage Banking Segment Results of Operations for the six months ended June 30, 2024 and 2023" above for additional discussion of the decrease in mortgage banking income.

See "Comparison of Mortgage Banking Segment Results of Operations for the nine months ended September 30, 2024 and 2023" above for additional discussion of the increase in mortgage banking income.