Waterstone Financial, Inc. 10-Q

Item 1. Financial Statements WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) June 30, 2026 December 31, 2025 (In Thousands, except share and per share data) Assets Cash $ 32,749 $ 63,560 Federal funds sold 5,159 7,255 Interest-earning deposits in other financial institutions and other short term investments 293 292 Cash and cash equivalents 38,201 71,107 Securities available for sale, at fair value (cost: 2026—$ 254,538 ; 2025—$ 246,579 ) 237,348 230,848 Loans held for sale, at fair value 151,688 145,057 Loans receivable 1,683,881 1,675,552 Less: Allowance for credit losses ("ACL") - loans 17,884 17,478 Loans receivable, net 1,665,997 1,658,074 Office properties and equipment, net 18,900 18,855 Federal Home Loan Bank stock, at cost 19,226 19,804 Cash surrender value of life insurance 79,217 77,353 Real estate owned, net 318 424 Prepaid expenses and other assets 41,864 37,985 Total assets $ 2,252,759 $ 2,259,507 Liabilities and Shareholders’ Equity Liabilities: Demand deposits $ 182,023 $ 175,595 Money market and savings deposits 343,530 329,031 Time deposits 895,428 932,646 Total deposits 1,420,981 1,437,272 Borrowings 412,000 412,258 Advance payments by borrowers for taxes 18,772 2,996 Other liabilities 49,877 57,589 Total liabilities 1,901,630 1,910,115 Commitments and contingencies (Note 8) Shareholders’ equity: Preferred stock (par value $ .01 per share) authorized - 50,000,000 shares at June 30, 2026 and at December 31, 2025, no shares issued - - Common stock (par value $ .01 per share) authorized - 100,000,000 shares at June 30, 2026 and at December 31, 2025, issued and outstanding - 17,975,028 at June 30, 2026 and 18,359,717 at December 31, 2025 180 184 Additional paid-in capital 71,637 78,014 Retained earnings 301,620 292,957 Unearned ESOP shares ( 8,902 ) ( 9,496 ) Accumulated other comprehensive loss, net of taxes ( 13,406 ) ( 12,267 ) Total shareholders’ equity 351,129 349,392 Total liabilities and shareholders’ equity $ 2,252,759 $ 2,259,507 See accompanying notes to unaudited consolidated financial statements. 3 Table of Contents WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three months ended June 30, Six months ended June 30, 2026 2025 2026 2025 (In Thousands, except per share amounts) Interest income: Loans $ 26,610 $ 25,875 $ 52,561 $ 50,953 Mortgage-related securities 1,479 1,253 2,933 2,444 Debt securities, federal funds sold and short-term investments 1,497 1,557 3,107 3,043 Total interest income 29,586 28,685 58,601 56,440 Interest expense: Deposits 10,035 10,967 20,408 22,299 Borrowings 3,541 4,010 6,720 7,857 Total interest expense 13,576 14,977 27,128 30,156 Net interest income 16,010 13,708 31,473 26,284 Provision (credit) for credit losses 236 ( 9 ) 500 ( 567 ) Net interest income after provision (credit) for credit losses 15,774 13,717 30,973 26,851 Noninterest income: Service charges on loans and deposits 463 413 837 1,006 Increase in cash surrender value of life insurance 1,135 1,014 1,684 1,495 Mortgage banking income 22,144 22,559 41,094 38,287 Other 498 343 853 638 Total noninterest income 24,240 24,329 44,468 41,426 Noninterest expenses: Compensation, payroll taxes, and other employee benefits 21,974 21,121 41,816 38,168 Occupancy, office furniture, and equipment 1,570 1,753 3,536 3,682 Advertising 727 746 1,344 1,469 Data processing 1,279 1,313 2,537 2,525 Communications 226 257 484 492 Professional fees 300 500 683 2,236 Real estate owned 27 ( 8 ) 29 ( 18 ) Loan processing expense 817 817 1,846 1,737 Other 2,459 1,878 4,979 4,436 Total noninterest expenses 29,379 28,377 57,254 54,727 Income before income taxes 10,635 9,669 18,187 13,550 Income tax expense 2,173 1,942 3,728 2,787 Net income $ 8,462 $ 7,727 $ 14,459 $ 10,763 Income per share: Basic $ 0.49 $ 0.43 $ 0.84 $ 0.59 Diluted $ 0.49 $ 0.43 $ 0.84 $ 0.59 Weighted average shares outstanding: Basic 17,114 17,989 17,243 18,127 Diluted 17,184 18,004 17,308 18,143 See accompanying notes to unaudited consolidated financial statements. 4 Table of Contents WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three months ended June 30, Six months ended June 30, 2026 2025 2026 2025 (In Thousands) Net income $ 8,462 $ 7,727 $ 14,459 $ 10,763 Other comprehensive (loss) income, net of tax: Net unrealized holding (loss) gain on available for sale securities: Net unrealized holding (loss) gain arising during the period, net of tax benefit (expense) of $ 34 , ($ 323 ), $ 320 , and ($ 982 ), respectively ( 119 ) 1,146 ( 1,139 ) 3,494 Total other comprehensive (loss) income ( 119 ) 1,146 ( 1,139 ) 3,494 Comprehensive income $ 8,343 $ 8,873 $ 13,320 $ 14,257 See accompanying notes to unaudited consolidated financial statements. 5 Table of Contents WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS ’ EQUITY (Unaudited) Accumulated Additional Unearned Other Total Common Stock Paid-In Retained ESOP Comprehensive Shareholders' Shares Amount Capital Earnings Shares Income (Loss) Equity (In Thousands, except per share amounts) For the six months ended June 30, 2025 Balances at December 31, 2024 19,343 $ 193 $ 91,214 $ 277,196 $ ( 10,682 ) $ ( 18,786 ) $ 339,135 Comprehensive income: Net income - - - 10,763 - - 10,763 Other comprehensive income - - - - - 3,494 3,494 Total comprehensive income 14,257 ESOP shares committed to be released to plan participants - - 101 - 593 - 694 Cash dividend, $ 0.30 per share - - - ( 5,381 ) - - ( 5,381 ) Stock compensation activity, net of tax 178 2 2,263 - - - 2,265 Stock compensation expense - - 188 - - - 188 Purchase of common stock returned to authorized but unissued ( 745 ) ( 7 ) ( 9,660 ) - - - ( 9,667 ) Balances at June 30, 2025 18,776 $ 188 $ 84,106 $ 282,578 $ ( 10,089 ) $ ( 15,292 ) $ 341,491 For the six months ended June 30, 2026 Balances at December 31, 2025 18,360 $ 184 $ 78,014 $ 292,957 $ ( 9,496 ) $ ( 12,267 ) $ 349,392 Comprehensive income: Net income - - - 14,459 - - 14,459 Other comprehensive loss - - - - - ( 1,139 ) ( 1,139 ) Total comprehensive income 13,320 ESOP shares committed to be released to plan participants - - 366 - 594 - 960 Cash dividend, $ 0.34 per share - - - ( 5,796 ) - - ( 5,796 ) Stock compensation activity, net of tax 61 1 1,026 - - - 1,027 Stock compensation expense - - 302 - - - 302 Purchase of common stock returned to authorized but unissued ( 446 ) ( 5 ) ( 8,071 ) - - - ( 8,076 ) Balances at June 30, 2026 17,975 $ 180 $ 71,637 $ 301,620 $ ( 8,902 ) $ ( 13,406 ) $ 351,129 6 Table of Contents Accumulated Additional Unearned Other Total Common Stock Paid-In Retained ESOP Comprehensive Shareholders' Shares Amount Capital Earnings Shares Income (Loss) Equity (In Thousands, except per share amounts) For the three months ended June 30, 2025 Balances at March 31, 2025 19,281 193 90,470 277,521 ( 10,386 ) ( 16,438 ) $ 341,360 Comprehensive income: Net Income - - - 7,727 - - 7,727 Other comprehensive income - - - - - 1,146 1,146 Total comprehensive income 8,873 ESOP shares committed to be released to Plan participants - - ( 13 ) - 297 - 284 Cash dividend, $ 0.15 per share - - - ( 2,670 ) - - ( 2,670 ) Stock compensation activity, net of tax 3 - 32 - - - 32 Stock compensation expense - - 106 - - - 106 Purchase of common stock returned to authorized but unissued ( 508 ) ( 5 ) ( 6,489 ) - - - ( 6,494 ) Balances at June 30, 2025 18,776 $ 188 $ 84,106 $ 282,578 $ ( 10,089 ) $ ( 15,292 ) $ 341,491 For the three months ended June 30, 2026 Balances at March 31, 2026 18,146 182 74,488 296,027 ( 9,199 ) ( 13,287 ) 348,211 Comprehensive income: Net income - - - 8,462 - - 8,462 Other comprehensive loss - - - - - ( 119 ) ( 119 ) Total comprehensive income 8,343 ESOP shares committed to be released to Plan participants - - 194 - 297 - 491 Cash dividend, $ 0.17 per share - - - ( 2,869 ) - - ( 2,869 ) Stock compensation activity, net of tax 29 1 478 - - - 479 Stock compensation expense - - 155 - - - 155 Purchase of common stock returned to authorized but unissued ( 200 ) ( 3 ) ( 3,678 ) - - - ( 3,681 ) Balances at June 30, 2026 17,975 $ 180 $ 71,637 $ 301,620 $ ( 8,902 ) $ ( 13,406 ) $ 351,129 See accompanying notes to unaudited consolidated financial statements. 7 Table of Contents WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six months ended June 30, 2026 2025 (In Thousands) Operating activities: Net income $ 14,459 $ 10,763 Adjustments to reconcile net income to net cash provided by operating activities: Provision (credit) for credit losses 500 ( 567 ) Depreciation, amortization, accretion 1,716 1,271 Deferred taxes ( 363 ) 473 Stock based compensation 302 188 Origination of mortgage servicing rights ( 295 ) ( 306 ) Gain on sale of loans held for sale ( 40,452 ) ( 37,907 ) Loans originated for sale ( 1,120,188 ) ( 976,701 ) Proceeds on sales of loans originated for sale 1,154,009 988,691 Decrease in accrued interest receivable 180 243 Increase in cash surrender value of life insurance ( 1,684 ) ( 1,495 ) (Increase) decrease in derivative assets ( 1,188 ) 3,486 Increase in accrued interest on deposits and borrowings 549 773 Increase in accrued taxes 827 1,239 Decrease (increase) in derivative liabilities 827 ( 2,970 ) (Increase) decrease in other assets ( 2,751 ) 90 Increase in other liabilities 2,408 1,024 Net cash provided by (used in) operating activities 8,856 ( 11,705 ) Investing activities: Net (increase) decrease in loans receivable ( 8,301 ) 16,375 Purchases of: Debt securities ( 5,673 ) ( 4,856 ) Mortgage related securities ( 14,241 ) ( 18,423 ) Bank Owned Life Insurance ( 180 ) ( 180 ) FHLB stock ( 1,795 ) ( 2,105 ) Premises and equipment ( 1,127 ) ( 324 ) Proceeds from: Principal repayments on mortgage-related securities 13,875 12,307 Maturities of debt securities 585 5,595 Sales of FHLB Stock 2,373 2,051 Net cash (used in) provided by investing activities ( 14,484 ) 10,440 Financing activities: Net (decrease) increase in deposits ( 16,291 ) 24,810 Net change in short-term borrowings ( 23,230 ) ( 40,793 ) Repayment of long-term debt ( 80,000 ) ( 40,000 ) Proceeds from long-term debt 102,972 100,000 Net change in advance payments by borrowers for taxes 1,840 1,284 Cash dividends on common stock ( 5,520 ) ( 5,472 ) Purchase of common stock returned to authorized but unissued ( 8,076 ) ( 9,667 ) Proceeds from stock option exercises 1,027 2,265 Net cash (used in) provided by financing activities ( 27,278 ) 32,427 (Decrease) increase in cash and cash equivalents ( 32,906 ) 31,162 Cash and cash equivalents at beginning of period 71,107 39,761 Cash and cash equivalents at end of period $ 38,201 $ 70,923 Supplemental information: Cash paid or credited during the period for: Income tax payments $ 2,989 $ 1,075 Interest payments 26,579 30,929 Noncash activities: Dividends declared but not paid in other liabilities 3,144 2,903 See accompanying notes to unaudited consolidated financial statements. 8 Table of Contents Note 1 — Basis of Presentation The unaudited interim consolidated financial statements include the accounts of Waterstone Financial, Inc. (the “Company”) and the Company’s subsidiaries. WaterStone Bank SSB (the "Bank") is a community bank that has served the banking needs of its customers since 1921. 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. WaterStone Bank's principal lending activity is originating one - to four -family, multi-family residential real estate, and commercial real estate loans for retention in its portfolio. WaterStone Bank also offers home equity loans and lines of credit, construction and land loans, commercial business loans, and consumer loans. WaterStone Bank funds its loan production primarily with retail deposits and Federal Home Loan Bank advances. The Company's deposit offerings include: 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 and 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. WaterStone Bank's mortgage banking operations are conducted through its wholly-owned subsidiary, Waterstone Mortgage Corporation. Waterstone Mortgage Corporation originates single-family residential real estate loans for sale into the secondary market. Waterstone Mortgage Corporation utilizes lines of credit provided by WaterStone Bank as a primary source of funds, and also utilizes a line of credit with another financial institution as needed. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information, Rule 10 - 01 of Regulation S- X and the instructions to Form 10 -Q. The financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations, changes in shareholders’ equity, and cash flows of the Company for the periods presented. The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the Company’s December 31, 2025 Annual Report on Form 10 -K. Operating results for the three and six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026 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. Significant items subject to such estimates and assumptions include the allowance for credit losses, income taxes, and fair value measurements. Actual results could differ from those estimates. Subsequent Events 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, 2026 through the issuance date of these unaudited consolidated financial statements that warranted adjustment to or disclosure in the unaudited consolidated financial statements. 9 Table of Contents Note 2 — Securities Available for Sale The amortized cost and fair values of the Company’s investment in securities available for sale follow: June 30, 2026 Gross Gross Amortized unrealized unrealized cost gains losses Fair value (In Thousands) Mortgage-backed securities $ 10,596 $ 2 $ ( 1,249 ) $ 9,349 Collateralized mortgage obligations: Government sponsored enterprise issued 167,759 57 ( 15,194 ) 152,622 Private-label issued 5,552 - ( 525 ) 5,027 Mortgage-related securities 183,907 59 ( 16,968 ) 166,998 Municipal securities 60,631 1,033 ( 739 ) 60,925 Other debt securities 10,000 - ( 575 ) 9,425 Debt securities 70,631 1,033 ( 1,314 ) 70,350 Total $ 254,538 $ 1,092 $ ( 18,282 ) $ 237,348 December 31, 2025 Gross Gross Amortized unrealized unrealized cost gains losses Fair value (In Thousands) Mortgage-backed securities $ 11,350 $ 13 $ ( 1,250 ) $ 10,113 Collateralized mortgage obligations Government sponsored enterprise issued 165,771 533 ( 13,995 ) 152,309 Private-label issued 6,032 - ( 513 ) 5,519 Mortgage related securities 183,153 546 ( 15,758 ) 167,941 Municipal securities 53,426 1,332 ( 651 ) 54,107 Other debt securities 10,000 - ( 1,200 ) 8,800 Debt securities 63,426 1,332 ( 1,851 ) 62,907 Total $ 246,579 $ 1,878 $ ( 17,609 ) $ 230,848 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, 2026 , $ 36,000 of the Company's mortgage related securities were pledged as collateral to secure mortgage banking related activities. At December 31, 2025 , $ 59,000 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, 2026 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. Amortized Fair Cost Value (In Thousands) Debt and other securities Due within one year $ 2,859 $ 2,878 Due after one year through five years 12,664 12,182 Due after five years through ten years 21,812 21,352 Due after ten years 33,296 33,938 Mortgage-related securities 183,907 166,998 Total $ 254,538 $ 237,348 10 Table of Contents 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, 2026 Less than 12 months 12 months or longer Total Fair Unrealized Fair Unrealized Fair Unrealized value loss value loss value loss (In Thousands) Mortgage-backed securities $ 1,577 $ 4 $ 7,607 $ 1,245 $ 9,184 $ 1,249 Collateralized mortgage obligations: Government sponsored enterprise issued 57,190 716 82,834 14,478 140,024 15,194 Private-label issued 837 10 4,190 515 5,027 525 Municipal securities 10,203 55 4,364 684 14,567 739 Other debt securities - - 9,425 575 9,425 575 Total $ 69,807 $ 785 $ 108,420 $ 17,497 $ 178,227 $ 18,282 December 31, 2025 Less than 12 months 12 months or longer Total Fair Unrealized Fair Unrealized Fair Unrealized value loss value loss value loss (In Thousands) Mortgage-backed securities $ - $ - $ 8,330 $ 1,250 $ 8,330 $ 1,250 Collateralized mortgage obligations: Government sponsored enterprise issued 12,355 33 89,205 13,962 101,560 13,995 Private-label issued 859 11 4,660 502 5,519 513 Municipal securities 752 8 4,912 643 5,664 651 Other debt securities - - 8,800 1,200 8,800 1,200 Total $ 13,966 $ 52 $ 115,907 $ 17,557 $ 129,873 $ 17,609 The Company reviews the investment securities portfolio on a quarterly basis to monitor securities in unrealized loss positions, which were comprised of 180 individual securities, to determine whether the impairment is due to credit-related factors or noncredit-related factors. 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, 2026 and December 31, 2025 , 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, 2026 and June 30, 2025 , there were no sales of securities. 11 Table of Contents Note 3 - Loans Receivable Loans receivable at June 30, 2026 and December 31, 2025 are summarized as follows: June 30, 2026 December 31, 2025 (In Thousands) Mortgage loans: Residential real estate: One- to four-family $ 460,495 $ 486,072 Multi-family 781,860 758,409 Home equity 12,939 13,213 Construction and land 67,944 56,340 Commercial real estate 324,373 327,346 Consumer 680 801 Commercial loans 35,590 33,371 Total $ 1,683,881 $ 1,675,552 The Company provides several types of loans to its customers, including residential, construction, commercial and consumer loans. Significant loan concentrations are considered to exist for a financial institution when there are amounts loaned to one borrower or to multiple borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. While the Company's credit risks are geographically concentrated in the Milwaukee metropolitan area, there are no concentrations with individual or groups of related borrowers. 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 $ 1.24 billion and $ 1.27 billion at June 30, 2026 and December 31, 2025 , respectively, were pledged as collateral against $ 405.4 million and $ 406.1 million in outstanding Federal Home Loan Bank of Chicago ("FHLB") advances under a blanket security agreement at June 30, 2026 and December 31, 2025 . An analysis of past due loans receivable as of June 30, 2026 and December 31, 2025 follows: As of June 30, 2026 1-59 Days Past Due (1) 60-89 Days Past Due (2) 90 Days or Greater Total Past Due Current (3) Total Loans (In Thousands) Mortgage loans: Residential real estate: One- to four-family $ 4,077 $ 1,030 $ 4,059 $ 9,166 $ 451,329 $ 460,495 Multi-family 454 - 239 693 781,167 781,860 Home equity 20 - - 20 12,919 12,939 Construction and land - - - - 67,944 67,944 Commercial real estate 217 452 - 669 323,704 324,373 Consumer - - - - 680 680 Commercial loans 75 - - 75 35,515 35,590 Total $ 4,843 $ 1,482 $ 4,298 $ 10,623 $ 1,673,258 $ 1,683,881 As of December 31, 2025 1-59 Days Past Due (1) 60-89 Days Past Due (2) 90 Days or Greater Total Past Due Current (3) Total Loans (In Thousands) Mortgage loans: Residential real estate: One- to four-family $ 6,072 $ 2,327 $ 4,832 $ 13,231 $ 472,841 $ 486,072 Multi-family 240 - - 240 758,169 758,409 Home equity 706 - - 706 12,507 13,213 Construction and land - - - - 56,340 56,340 Commercial real estate 230 - - 230 327,116 327,346 Consumer - - - - 801 801 Commercial loans - - - - 33,371 33,371 Total $ 7,248 $ 2,327 $ 4,832 $ 14,407 $ 1,661,145 $ 1,675,552 ( 1 ) Includes $ 785,000 and $ 819,000 at June 30, 2026 and December 31, 2025 , respectively, which are on non-accrual status. ( 2 ) Includes $ 462,000 and $ - at June 30, 2026 and December 31, 2025 , respectively, which are on non-accrual status. ( 3 ) Includes $ 991,000 and $ 523,000 at June 30, 2026 and December 31, 2025 , respectively, which are on non-accrual status. 12 Table of Contents The following tables present the activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2026 and the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2025 : One- to Four-Family Multi-Family Home Equity Land and Construction Commercial Real Estate Consumer Commercial Total (In Thousands) Six months ended June 30, 2026 Balance at beginning of period $ 4,916 $ 6,948 $ 201 $ 932 $ 4,114 $ 77 $ 290 $ 17,478 Provision (credit) for credit losses - loans ( 517 ) 726 ( 58 ) 121 100 2 5 379 Charge-offs - - - - - ( 15 ) - ( 15 ) Recoveries 36 3 - 2 - 1 - 42 Balance at end of period $ 4,435 $ 7,677 $ 143 $ 1,055 $ 4,214 $ 65 $ 295 $ 17,884 Six months ended June 30, 2025 Balance at beginning of period $ 5,286 $ 7,079 $ 212 $ 1,205 $ 3,920 $ 79 $ 466 $ 18,247 Provision (credit) for credit losses - loans ( 213 ) ( 424 ) ( 15 ) ( 26 ) 267 15 ( 73 ) ( 469 ) Charge-offs - - - - - ( 25 ) - ( 25 ) Recoveries 37 - - 2 - 8 - 47 Balance at end of period $ 5,110 $ 6,655 $ 197 $ 1,181 $ 4,187 $ 77 $ 393 $ 17,800 One to-Four- Family Multi-Family Home Equity Construction and Land Commercial Real Estate Consumer Commercial Total (In Thousands) Three months ended June 30, 2026 Balance at beginning of period $ 4,446 $ 7,599 $ 163 $ 1,055 $ 4,078 $ 69 $ 299 $ 17,709 Provision (credit) for credit losses - loans ( 27 ) 78 ( 20 ) ( 1 ) 136 ( 3 ) ( 4 ) 159 Charge-offs - - - - - ( 1 ) - ( 1 ) Recoveries 16 - - 1 - - - 17 Balance at end of period $ 4,435 $ 7,677 $ 143 $ 1,055 $ 4,214 $ 65 $ 295 $ 17,884 Three months ended June 30, 2025 Balance at beginning of period $ 4,979 $ 6,938 $ 193 $ 1,042 $ 4,173 $ 77 $ 503 $ 17,905 Provision (credit) for credit losses - loans 126 ( 283 ) 4 138 14 ( 4 ) ( 110 ) ( 115 ) Charge-offs - - - - - ( 4 ) - ( 4 ) Recoveries 5 - - 1 - 8 - 14 Balance at end of period $ 5,110 $ 6,655 $ 197 $ 1,181 $ 4,187 $ 77 $ 393 $ 17,800 The Company utilized the Vintage Loss Rate method in determining expected future credit losses. This technique considers losses over the full life cycle of loan pools. A vintage is a group of loans originated in the same annual time period. The loss rate method measures the amount of loan charge–offs, net of recoveries, (“loan losses”) recognized over the life of a pool by loan segment and vintage and compares those loan losses to the original loan balance of that pool as of a similar vintage. To estimate a CECL loss rate for the pool, management first identifies the loan losses recognized between the pool date and the reporting date for the pool and determines which loan losses were related to loans outstanding at the pool date. The loss rate method then divides the loan losses recognized on loans outstanding as of the pool date by the outstanding loan balance as of the pool date. The Company’s expected loss estimate is anchored in historical credit loss experience, with an emphasis on all available portfolio data. The Company's historical look–back period includes January 2012 through the current period, on an annual basis. When historical credit loss experience is not sufficient for a specific portfolio, the Company may supplement its own portfolio data with external models or data. Additionally, the weighted average remaining maturity ("WARM") method is used for the Construction and Consumer loan pools. The WARM method considers an estimate of expected credit losses over the remaining life of the financial assets and uses average annual charge-off rates to estimate the allowance for credit losses. For amortizing assets, the remaining contractual life is adjusted by the expected scheduled payments and prepayments. The average annual charge-off rate is applied to the amortization-adjusted remaining life to determine the unadjusted lifetime historical charge-off rate. 13 Table of Contents Qualitative reserves reflect management’s overall estimate of the extent to which current expected credit losses on collectively evaluated loans will differ from historical loss experience. The analysis takes into consideration other analytics performed within the organization, such as enterprise and concentration management. Management attempts to quantify qualitative reserves whenever possible. The CECL methodology applied focuses on evaluation of qualitative and environmental factors, including but not limited to: (i) evaluation of facts and issues related to specific loans; (ii) management’s ongoing review and grading of the loan portfolio; (iii) consideration of historical loan loss and delinquency experience on each portfolio segment; (iv) trends in past due and nonperforming loans; (v) the risk characteristics of the various loan segments; (vi) changes in the size and character of the loan portfolio; (vii) concentrations of loans to specific borrowers or industries; (viii) existing economic conditions; (ix) the fair value of underlying collateral; and ( x ) other qualitative and quantitative factors which could affect expected credit losses. The Company’s CECL estimate applies a forecast that incorporates macroeconomic trends and other environmental factors. Management utilized national, regional and local leading economic indexes, as well as management judgment, as the basis for the forecast period. The historical loss rate was utilized as the base rate, and qualitative adjustments were utilized to reflect the forecast and other relevant factors. The Company segments the loan portfolio into pools based on the following risk characteristics: collateral type, credit characteristics, loan origination balance, and outstanding loan balances. Allowance for Credit Losses-Unfunded Commitments : In addition to the ACL-Loans, the Company has established an ACL-Unfunded commitments, classified in other liabilities on the consolidated statements of financial condition. 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 were $ 861,000 and $ 740,000 at June 30, 2026 and December 31, 2025 , respectively. Provision for Credit Losses : The provision for credit losses is determined by the Company as the amount to be added to the ACL loss accounts for various types of financial instruments including loans, investment securities, and off-balance sheet credit exposures after net charge-offs have been deducted to bring the ACL to a level that, in management's judgment, is necessary to absorb expected credit losses over the lives of the respective financial instruments. See Note 2 - Securities Available for Sale for additional information regarding the ACL related to investment securities. The following table presents the components of the provision for credit losses. Three months ended Six months ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 (In Thousands) Provision (credit) for credit losses on: Loans $ 159 $ ( 115 ) $ 379 $ ( 469 ) Unfunded commitments 77 106 121 ( 98 ) Investment securities - - - - Total $ 236 $ ( 9 ) $ 500 $ ( 567 ) Collateral Dependent Loans : A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. For collateral dependent loans, expected credit losses are based on the estimated fair value of the collateral at the balance sheet date, with consideration for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. The following tables present collateral dependent loans by portfolio segment and collateral type, including those loans with and without a related allowance allocation. 14 Table of Contents The following tables present collateral dependent loans by portfolio segment as of June 30, 2026 and December 31, 2025 : June 30, 2026 December 31, 2025 (In Thousands) Collateral dependent loans Residential real estate: One- to four-family $ 4,348 $ 4,282 Multi family 239 177 Home equity - 14 Construction and land - - Commercial real estate 11,152 11,282 Consumer - - Commercial loans - - Total loans receivable $ 15,739 $ 15,755 The Company's procedures dictate that an updated valuation must be obtained with respect to underlying collateral at the time a loan is deemed impaired. Updated valuations may also be obtained upon transfer from loans receivable to real estate owned based upon the age of the prior appraisal, changes in market conditions or known changes to the physical condition of the property. Estimated fair values are reduced to account for sales commissions, broker fees, unpaid property taxes and additional selling expenses to arrive at an estimated net realizable value. The adjustment factor is based upon the Company's actual experience with respect to sales of real estate owned over the prior two years. In situations in which the Company is placing reliance on an appraisal that is more than one year old, an additional adjustment factor is applied to account for downward market pressure since the date of appraisal. The additional adjustment factor is based upon relevant sales data available for the Company's general operating market as well as company-specific historical net realizable values as compared to the most recent appraisal prior to disposition. With respect to multi-family income-producing real estate, appraisals are reviewed and estimated collateral values are adjusted by updating significant appraisal assumptions to reflect current real estate market conditions. Significant assumptions reviewed and updated include the capitalization rate, rental income and operating expenses. These adjusted assumptions are based upon recent appraisals received on similar properties as well as on actual experience related to real estate owned and currently under Company management. 15 Table of Contents Credit Quality Indicators The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company establishes a risk rating at origination for all commercial loan and commercial real estate relationships. For relationships over $1 million, management monitors the loans on an ongoing basis for any changes in the borrower’s ability to service their debt. Management also affirms the risk ratings for the loans in their respective portfolios on an annual basis. The Company uses the following definitions for risk ratings: Watch. Loans classified as watch have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Watch assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt and, additionally, the weakness or weaknesses to make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable or improbable. Substandard loans are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. 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, 2026 and December 31, 2025 : One to Four-Family Multi-Family Home Equity Construction and Land Commercial Real Estate Consumer Commercial Total (In Thousands) At June 30, 2026 Substandard $ 6,179 $ 239 $ - $ - $ 11,152 $ - $ - $ 17,570 Watch 5,924 - - - 805 - 1,227 7,956 Pass 448,392 781,621 12,939 67,944 312,416 680 34,363 1,658,355 $ 460,495 $ 781,860 $ 12,939 $ 67,944 $ 324,373 $ 680 $ 35,590 $ 1,683,881 At December 31, 2025 Substandard $ 5,861 $ 177 $ 14 $ - $ 11,282 $ - $ - $ 17,334 Watch 9,831 - 69 - 424 - 1,437 11,761 Pass 470,380 758,232 13,130 56,340 315,640 801 31,934 1,646,457 $ 486,072 $ 758,409 $ 13,213 $ 56,340 $ 327,346 $ 801 $ 33,371 $ 1,675,552 16 Table of Contents Credit Quality Information: The following table presents total loans by risk categories and year of origination as of June 30, 2026 : 2026 2025 2024 2023 2022 Prior Revolving Total (In Thousands) One- to four-family Pass $ 21,934 $ 25,549 $ 27,643 $ 142,072 $ 126,698 $ 103,444 $ 1,052 $ 448,392 Watch 4,757 - 42 - 452 673 - 5,924 Substandard 2,229 1,335 - 583 443 1,589 - 6,179 Total 28,920 26,884 27,685 142,655 127,593 105,706 1,052 460,495 Multi-family Pass 104,026 195,909 38,118 104,468 145,135 192,668 1,297 $ 781,621 Watch - - - - - - - - Substandard 239 - - - - - - 239 Total 104,265 195,909 38,118 104,468 145,135 192,668 1,297 781,860 Home equity Pass 35 550 265 353 1,488 195 10,053 $ 12,939 Watch - - - - - - - - Substandard - - - - - - - - Total 35 550 265 353 1,488 195 10,053 12,939 Construction and land Pass 138 27,254 40,400 - 138 14 - $ 67,944 Watch - - - - - - - - Substandard - - - - - - - - Total 138 27,254 40,400 - 138 14 - 67,944 Commercial Real Estate Pass 52,233 53,771 54,396 35,747 39,405 74,935 1,929 $ 312,416 Watch - 578 - 227 - - - 805 Substandard 11,034 118 - - - - - 11,152 Total 63,267 54,467 54,396 35,974 39,405 74,935 1,929 324,373 Consumer Pass - - - - - - 680 $ 680 Watch - - - - - - - - Substandard - - - - - - - - Total - - - - - - 680 680 Commercial Pass 1,280 3,507 233 16,114 612 1,396 11,221 $ 34,363 Watch - - - - 2 - 1,225 1,227 Substandard - - - - - - - - Total 1,280 3,507 233 16,114 614 1,396 12,446 35,590 Total Loans $ 197,905 $ 308,571 $ 161,097 $ 299,564 $ 314,373 $ 374,914 $ 27,457 $ 1,683,881 Gross charge-offs $ - $ - $ - $ - $ - $ - $ 15 $ 15 17 Table of Contents The following table presents total loans by risk categories and year of origination as of December 31, 2025 : 2025 2024 2023 2022 2021 Prior Revolving Total (In Thousands) One- to four-family Pass $ 26,575 $ 29,945 $ 154,904 $ 138,715 $ 35,632 $ 83,320 $ 1,289 $ 470,380 Watch 6,261 44 458 1,720 - 1,348 - 9,831 Substandard 2,373 523 1,036 540 - 1,389 - 5,861 Total 35,209 30,512 156,398 140,975 35,632 86,057 1,289 486,072 Multi-family Pass 199,544 62,973 111,186 149,108 102,220 132,675 526 $ 758,232 Watch - - - - - - - - Substandard - - 177 - - - - 177 Total 199,544 62,973 111,363 149,108 102,220 132,675 526 758,409 Home equity Pass 564 352 368 1,533 67 151 10,095 $ 13,130 Watch - - - - - - 69 69 Substandard - - - - 14 - - 14 Total 564 352 368 1,533 81 151 10,164 13,213 Construction and land Pass 14,937 37,521 3,728 139 - 15 - $ 56,340 Watch - - - - - - - - Substandard - - - - - - - - Total 14,937 37,521 3,728 139 - 15 - 56,340 Commercial Real Estate Pass 63,935 56,767 61,258 41,542 53,097 34,788 4,253 $ 315,640 Watch 194 - 230 - - - - 424 Substandard 11,282 - - - - - - 11,282 Total 75,411 56,767 61,488 41,542 53,097 34,788 4,253 327,346 Consumer Pass - - - - - - 801 $ 801 Watch - - - - - - - - Substandard - - - - - - - - Total - - - - - - 801 801 Commercial Pass 3,972 533 16,407 785 322 1,300 8,615 $ 31,934 Watch - - - 11 - - 1,426 1,437 Substandard - - - - - - - - Total 3,972 533 16,407 796 322 1,300 10,041 33,371 Total Loans $ 329,637 $ 188,658 $ 349,752 $ 334,093 $ 191,352 $ 254,986 $ 27,074 $ 1,675,552 18 Table of Contents The following presents data on restructurings of financing receivables whose borrowers are experiencing financial difficulty: As of June 30, 2026 Accruing Non-accruing Total Amount Number Amount Number Amount Number (Dollars in Thousands) One- to four-family $ - - $ 1,613 4 $ 1,613 4 Commercial Real Estate 6,706 1 - - 6,706 1 $ 6,706 1 $ 1,613 4 $ 8,319 5 As of December 31, 2025 Accruing Non-accruing Total Amount Number Amount Number Amount Number (Dollars in Thousands) One- to four-family $ - - $ 962 2 $ 962 2 Commercial Real Estate 6,706 1 - - 6,706 1 $ 6,706 1 $ 962 2 $ 7,668 3 The following presents restructurings of financing receivables whose borrowers are experiencing financial difficulty by concession type: As of June 30, 2026 Performing in accordance with modified terms In Default Total Amount Number Amount Number Amount Number (Dollars in Thousands) Principal forbearance $ 8,319 5 $ - - $ 8,319 5 $ 8,319 5 $ - - $ 8,319 5 As of December 31, 2025 Performing in accordance with modified terms In Default Total Amount Number Amount Number Amount Number (Dollars in Thousands) Interest reduction $ - - $ - - $ - - Principal forbearance 7,668 3 - - 7,668 3 $ 7,668 3 $ - - $ 7,668 3 There were no 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, 2026 and June 30, 2025 . The following table presents data on non-accrual loans as of June 30, 2026 and December 31, 2025 : June 30, 2026 December 31, 2025 (Dollars in Thousands) Non-accrual loans: Residential One- to four-family $ 6,179 $ 5,861 Multi-family 239 177 Home equity - 14 Construction and land - - Commercial real estate 118 123 Commercial - - Consumer - - Total non-accrual loans $ 6,536 $ 6,175 Total non-accrual loans to total loans receivable 0.39 % 0.37 % Total non-accrual loans to total assets 0.29 % 0.27 % Residential one - to four -family mortgage loans that were in the process of foreclosure were $ 1.5 million and $ 1.9 million at June 30, 2026 and December 31, 2025 , respectively. 19 Table of Contents Note 4 — Mortgage Servicing Rights The following table presents the activity in the Company’s mortgage servicing rights: Six months ended June 30, 2026 2025 (In Thousands) Mortgage servicing rights at beginning of the period $ 1,030 $ 732 Additions 295 306 Amortization ( 183 ) ( 81 ) Sales - - Mortgage servicing rights at end of the period 1,142 957 Valuation allowance recorded during the period - ( 31 ) Mortgage servicing rights at end of the period, net $ 1,142 $ 926 The unpaid principal balance of loans serviced for others was $ 131.9 million and $ 119.0 million at June 30, 2026 and December 31, 2025 , respectively. These loans are not reflected in the consolidated statements of financial condition. The fair value of mortgage servicing rights was $ 1.5 million at June 30, 2026 and $ 1.3 million at December 31, 2025 , respectively. During the three and six months ended June 30, 2026 and 2025 , there were no sales of mortgage servicing rights. The following table shows the estimated future amortization expense for mortgage servicing rights for the periods indicated: (In Thousands) Estimate for the annual period ending December 31: 2026 $ 208 2027 187 2028 166 2029 145 2030 125 Thereafter 311 Total $ 1,142 Note 5 — Deposits At June 30, 2026 and December 31, 2025 , the aggregate balance of uninsured time deposits of $250,000 or more was $ 198.6 million and $ 183.2 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, 2026 is as follows: (In Thousands) Within one year $ 864,907 More than one to two years 26,772 More than two to three years 3,380 More than three to four years 209 More than four through five years 160 $ 895,428 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 $ 20.4 million and $ 25.5 million at June 30, 2026 and December 31, 2025 , respectively. 20 Table of Contents Note 6 — Borrowings Borrowings consist of the following: June 30, 2026 December 31, 2025 Category Balance Weighted Average Rate Balance Weighted Average Rate (Dollars in Thousands) FHLB advances FHLB short-term advances $ 192,419 3.64 % $ 216,084 3.69 % FHLB long-term advances maturing 2027 102,972 2.52 % 50,000 1.73 % FHLB long-term advances maturing 2028 10,000 3.50 % 40,000 3.38 % FHLB long-term advances maturing 2029 70,000 3.46 % 60,000 3.48 % FHLB long-term advances maturing 2030 20,000 3.29 % 40,000 3.21 % FHLB long-term advances maturing 2031 10,000 3.21 % - - Total FHLB advances 405,391 3.29 % 406,084 3.34 % Repurchase agreements 6,609 5.98 % 6,174 6.68 % Total borrowings $ 412,000 3.34 % $ 412,258 3.39 % The short-term repurchase agreement represents the outstanding portion of a total $ 50.0 million commitment with one unrelated bank as of June 30, 2026 . The short-term repurchase agreement is utilized by Waterstone Mortgage Corporation to finance loans originated for sale. This agreement is secured by the underlying loans being financed. Related interest rates are based upon the note rate associated with the loans being financed. The short-term repurchase agreement had a $ 6.6 million balance at June 30, 2026 and a $ 6.2 million balance at December 31, 2025 . The $ 192.4 million in FHLB short-term advances as of June 30, 2026 have fixed rates. The $ 213.0 million in FHLB long-term advances as of June 30, 2026 have fixed rates. A total of $ 110.0 million in FHLB long-term advances have FHLB call options available. The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. In addition, the Company enters into agreements under which it sells loans held for sale subject to an obligation to repurchase the same loans. Under these arrangements, the Company may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Company to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing arrangements (i.e., secured borrowings) and not as a sale and subsequent repurchase of assets. The obligation to repurchase the assets is reflected as a liability in the Company's consolidated statements of financial condition, while the securities and loans held for sale underlying the repurchase agreements remain in the respective investment securities and loans held for sale asset accounts. In other words, there is no offsetting or netting of the investment securities or loans held for sale assets with the repurchase agreement liabilities. The Company's repurchase agreement is subject to master netting agreements, which sets forth the rights and obligations for repurchase and offset. Under the master netting agreement, the Company is entitled to set off the collateral placed with a single counterparty against obligations owed to that counterparty. At June 30, 2026 , the Company had approximately $ 383.1 million in unused borrowing capacity at the FHLB. 21 Table of Contents 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 $ 19.2 million at June 30, 2026 and $ 19.8 million at December 31, 2025 , respectively. In the event of prepayment, the Company is obligated to pay all remaining contractual interest on the advance. Note 7 – Regulatory Capital The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements, or overall financial performance deemed by the regulators to be inadequate, can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Company's and Bank’s assets, liabilities, and certain off-balance-sheet items, as calculated under regulatory accounting practices. The Company's and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. As required by applicable legislation, the federal banking agencies were required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies must set the minimum capital for the new Community Bank Leverage Ratio at not less than 8% and not more than 10%. The Community Bank Leverage Ratio is currently 9%. A financial institution can elect to be subject to this new definition, and opt-out of this new definition, at any time. As a qualified community bank, we elected to opt-out of this definition. Prompt corrective action regulations provide five classifications: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If only adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. The minimum capital ratios set forth in the Regulatory Capital Plans will be increased and other minimum capital requirements will be established if and as necessary. In accordance with the Regulatory Capital Plans, the Bank will not pursue any acquisition or growth opportunity, declare any dividend or conduct any stock repurchase that would cause the Bank's total risk-based capital ratio and/or its Tier 1 leverage ratio to fall below the established minimum capital levels or the capital levels required for capital adequacy plus the capital conservation buffer. The minimum capital conservation buffer is 2.5%. As of June 30, 2026 , 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. 22 Table of Contents The actual and required capital amounts and ratios for the Bank as of June 30, 2026 and December 31, 2025 are presented in the tables below: June 30, 2026 Actual For Capital Adequacy Purposes Minimum Capital Adequacy with Capital Buffer To Be Well-Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio Amount Ratio (Dollars In Thousands) Total Capital (to risk-weighted assets) Consolidated Waterstone Financial, Inc. $ 382,410 20.73 % $ 147,550 8.00 % $ 193,660 10.50 % N/A N/A Waterstone Bank 362,782 19.68 % 147,500 8.00 % 193,590 10.50 % 184,375 10.00 % Tier 1 Capital (to risk-weighted assets) Consolidated Waterstone Financial, Inc. 363,665 19.72 % 110,660 6.00 % 156,770 8.50 % N/A N/A Waterstone Bank 344,037 18.66 % 110,630 6.00 % 156,720 8.50 % 147,500 8.00 % Common Equity Tier 1 Capital (to risk-weighted assets) Consolidated Waterstone Financial, Inc. 363,665 19.72 % 83,000 4.50 % 129,110 7.00 % N/A N/A Waterstone Bank 344,037 18.66 % 82,970 4.50 % 129,060 7.00 % 119,844 6.50 % Tier 1 Capital (to average assets) Consolidated Waterstone Financial, Inc. 363,665 16.31 % 89,190 4.00 % N/A N/A N/A N/A Waterstone Bank 344,037 15.43 % 89,190 4.00 % N/A N/A 111,488 5.00 % State of Wisconsin (to total assets) Waterstone Bank 344,037 15.27 % 135,170 6.00 % N/A N/A N/A N/A December 31, 2025 Actual For Capital Adequacy Purposes Minimum Capital Adequacy with Capital Buffer To Be Well-Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio Amount Ratio (Dollars In Thousands) Total capital (to risk-weighted assets) Consolidated Waterstone Financial, Inc. 379,102 21.13 % 143,550 8.00 % 188,410 10.50 % N/A N/A Waterstone Bank 367,517 20.49 % 143,526 8.00 % 188,377 10.50 % 179,407 10.00 % Tier 1 capital (to risk-weighted assets) Consolidated Waterstone Financial, Inc. 360,884 20.11 % 107,662 6.00 % 152,522 8.50 % N/A N/A Waterstone Bank 349,299 19.47 % 107,644 6.00 % 152,495 8.50 % 143,525 8.00 % Common Equity Tier 1 Capital (to risk-weighted assets) Consolidated Waterstone Financial, Inc. 360,884 20.11 % 80,747 4.50 % 125,606 7.00 % N/A N/A Waterstone Bank 349,299 19.47 % 80,733 4.50 % 125,585 7.00 % 116,614 6.50 % Tier 1 Capital (to average assets) Consolidated Waterstone Financial, Inc. 360,884 15.94 % 90,580 4.00 % N/A N/A N/A N/A Waterstone Bank 349,299 15.43 % 90,550 4.00 % N/A N/A 113,191 5.00 % State of Wisconsin (to total assets) Waterstone Bank 349,299 15.46 % 135,550 6.00 % N/A N/A N/A N/A 23 Table of Contents Note 8 – Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated statements of financial condition. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. June 30, 2026 December 31, 2025 (In Thousands) Financial instruments whose contract amounts represent potential credit risk: Commitments to extend credit under amortizing loans (1) $ 57,563 $ 12,736 Commitments to extend credit under home equity lines of credit (2) 11,883 10,520 Unused portion of construction loans (3) 29,610 44,578 Unused portion of business lines of credit 11,405 13,966 Standby letters of credit 1,277 1,827 ( 1 ) Commitments for loans are extended to customers for up to 90 days after which they expire. Excludes commitments to originate loans held for sale, which are discussed in the following footnote. ( 2 ) Unused portions of home equity loans are available to the borrower for up to 10 years. ( 3 ) Unused portions of construction loans are available to the borrower for up to one year. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the counter-party. Collateral obtained generally consists of mortgages on the underlying real estate. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. 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, 2026 and December 31, 2025 . Please see Note 3 - Loans Receivable for discussion on the allowance for credit losses - unfunded commitments. Residential mortgage loans sold to others are predominantly conventional residential first lien mortgages. The Company’s agreements to sell residential mortgage loans in the normal course of business usually require certain representations and warranties on the underlying loans sold related to credit information, loan documentation and collateral, which if subsequently are untrue or breached, could require the Company to repurchase certain loans affected. The Company has only been required to make insignificant repurchases as a result of breaches of these representations and warranties. The Company’s agreements to sell residential mortgage loans also contain limited recourse provisions. The recourse provisions are limited in that the recourse provision ends after certain payment criteria have been met. With respect to these loans, repurchase could be required if defined delinquency issues arose during the limited recourse period. 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 $ 1.1 million as of June 30, 2026 and $ 1.0 million as of December 31, 2025 . In the normal course of business, the Company, or its subsidiaries, are involved in various legal proceedings. In the opinion of management, any liability resulting from pending proceedings would not be expected to have a material adverse effect on the Company's consolidated financial statements. 24 Table of Contents Note 9 – Derivative Financial Instruments Mortgage Banking Derivatives In connection with its mortgage banking activities, the Company enters into derivative financial instruments as part of its strategy to manage its exposure to changes in interest rates. Mortgage banking derivatives include interest rate lock commitments provided to customers to fund mortgage loans to be sold in the secondary market and forward commitments for the future delivery of such loans. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on its commitments to fund the loans as well as on its portfolio of mortgage loans held-for-sale. The Company’s mortgage banking derivatives have not been designated as being a hedge relationship. These instruments are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of ASC Topic 815. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. The Company does not use derivatives for speculative purposes. Derivative Loan Commitments Mortgage loan commitments qualify as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. The Company enters into commitments to fund residential mortgage loans at specified times in the future, with the intention that these loans will subsequently be sold in the secondary market. A mortgage loan commitment binds the Company to lend funds to a potential borrower at a specified interest rate and within a specified period of time, generally up to 60 days after inception of the rate lock. Outstanding derivative loan commitments expose the Company to the risk that the price of the loans arising from exercise of the loan commitment might decline from inception of a rate lock to funding of the loan due to increases in mortgage interest rates. If interest rates increase, the value of these loan commitments decreases. Conversely, if interest rates decrease, the value of these loan commitments increases. Forward Loan Sale Commitments The Company utilizes both “mandatory delivery” and “best efforts” forward loan sale commitments to mitigate the risk of potential decreases in the values of loans that would result from the exercise of the derivative loan commitments. With a “mandatory delivery” contract, the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. If the Company fails to deliver the number of mortgages necessary to fulfill the commitment by the specified date, it is obligated to pay a “pair-off” fee, based on then-current market prices, to the investor to compensate the investor for the shortfall. With a “best efforts” contract, the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. Generally, the price the investor will pay the seller for an individual loan is specified prior to the loan being funded (e.g., on the same day the lender commits to lend funds to a potential borrower). The Company expects that these forward loan sale commitments will experience changes in fair value opposite to the change in fair value of derivative loan commitments. Interest Rate Swaps The Company may offer derivative contracts to its customers in connection with their risk management needs. The Company manages the risk associated with these contracts by entering into an equal and offsetting derivative with a third -party dealer through back-to-back swaps. These derivatives generally work together as an economic interest rate hedge, but the Company does not designate them for hedge accounting treatment. Consequently, changes in fair value of the corresponding derivative financial asset or liability are recorded as either a charge or credit to current earnings during the period in which the changes occurred. The fair value of the swaps is recorded as both an asset and a liability, in other assets and other liabilities on the Company's consolidated statement of financial condition, respectively, in equal amounts for these transactions. 25 Table of Contents The following tables presents the outstanding notional balances and fair values of outstanding derivative instruments: June 30, 2026 Assets Liabilities Derivatives not designated as Hedging Instruments Notional Amount Balance Sheet Location Fair Value Balance Sheet Location Fair Value (In Millions) Forward commitments $ 239.3 Other assets $ 0.1 Other liabilities $ 0.3 Interest rate locks 146.8 Other assets 1.0 Other liabilities - Interest rate swaps 157.7 Other assets 8.4 Other liabilities 8.4 December 31, 2025 Assets Liabilities Derivatives not designated as Hedging Instruments Notional Amount Balance Sheet Location Fair Value Balance Sheet Location Fair Value (In Millions) Forward commitments $ 118.6 Other assets $ - Other liabilities $ 0.2 Interest rate locks 92.9 Other assets 0.6 Other liabilities - Interest rate swaps 156.6 Other assets 7.7 Other liabilities 7.7 In determining the fair value of its derivative loan commitments, the Company considers the value that would be generated by the loan arising from exercise of the loan commitment when sold in the secondary mortgage market. That value includes the price that the loan is expected to be sold for in the secondary mortgage market. The fair value of these commitments is recorded on the consolidated statements of financial condition with the changes in fair value recorded as a component of mortgage banking income. The significant unobservable input used in the fair value measurement of the Company's mortgage banking derivatives, including interest rate lock commitments, is the loan pull through rate. This represents the percentage of loans currently in a lock position which the Company estimates will ultimately close. Generally, the fair value of an interest rate lock commitment will be positively (negatively) impacted when the prevailing interest rate is lower (higher) than the interest rate lock commitment. Generally, an increase in the pull through rate will result in the fair value of the interest rate lock increasing when in a gain position, or decreasing when in a loss position. The pull through rate is largely dependent on the loan processing stage that a loan is currently in and the change in prevailing interest rates from the time of the rate lock. The pull through rate is computed using historical data and the ratio is periodically reviewed by the Company. Interest Rate Swaps The back-to-back swaps mature in August 2026 to June 2037. Commercial borrower swaps are completed independently with each borrower and are not subject to master netting arrangements. As of June 30, 2026 and December 31, 2025 , no back-to-back swaps were in default. The Company pays fixed rates and receives floating rates based upon SOFR 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, 2026 and December 31, 2025 . All changes in the fair value of these instruments are recorded in other non-interest income. The Company pledged no cash at June 30, 2026 and at December 31, 2025 . 26 Table of Contents Note 10 – Earnings Per Share Earnings per share are computed using the two -class method. Basic earnings per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the applicable period. 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 40,000 and 217,000 antidilutive shares of common stock for the three months ended June 30, 2026 and 2025 , respectively. There were 45,000 and 216,000 antidilutive shares of common stock for the six months ended June 30, 2026 and June 30, 2025 Presented below are the calculations for basic and diluted earnings per share: Three months ended June 30, Six months ended June 30, 2026 2025 2026 2025 (In Thousands, except per share amounts) Net income $ 8,462 $ 7,727 $ 14,459 $ 10,763 Weighted average shares outstanding 17,114 17,989 17,243 18,127 Effect of dilutive potential common shares 70 15 65 16 Diluted weighted average shares outstanding 17,184 18,004 $ 17,308 $ 18,143 Basic earnings per share $ 0.49 $ 0.43 $ 0.84 $ 0.59 Diluted earnings per share $ 0.49 $ 0.43 $ 0.84 $ 0.59 Note 11 – Fair Value Measurements ASC Topic 820, "Fair Value Measurements and Disclosures" defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This accounting standard applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements. The standard also emphasizes that fair value (i.e., the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date), among other things, is based on exit price versus entry price, should include assumptions about risk such as nonperformance risk in liability fair values, and is a market-based measurement, not an entity-specific measurement. When considering the assumptions that market participants would use in pricing the asset or liability, this accounting standard establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). The fair value hierarchy prioritizes inputs used to measure fair value into three broad levels. Level 1 inputs - In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that we have the ability to access. Level 2 inputs - Fair values determined by Level 2 inputs use inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets where there are few transactions and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs - Level 3 inputs are unobservable inputs for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. 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. 27 Table of Contents 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, 2026 and December 31, 2025 , and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. Fair Value Measurements Using June 30, 2026 Level 1 Level 2 Level 3 (In Thousands) Assets Available for sale securities Mortgage-backed securities $ 9,349 $ - $ 9,349 $ - Collateralized mortgage obligations Government sponsored enterprise issued 152,622 - 152,622 - Private-label issued 5,027 - 5,027 - Municipal securities 60,925 - 60,925 - Other debt securities 9,425 - 9,425 - Loans held for sale 151,688 - 151,688 - Mortgage banking derivative assets 1,066 - - 1,066 Interest rate swap assets 8,432 - 8,432 - Liabilities Mortgage banking derivative liabilities 306 - - 306 Interest rate swap liabilities 8,432 - 8,432 - Fair Value Measurements Using December 31, 2025 Level 1 Level 2 Level 3 (In Thousands) Assets Available for sale securities Mortgage-backed securities $ 10,113 $ - $ 10,113 $ - Collateralized mortgage obligations Government sponsored enterprise issued 152,309 - 152,309 - Private-label issued 5,519 - 5,519 - Municipal securities 54,107 - 54,107 - Other debt securities 8,800 - 8,800 - Loans held for sale 145,057 - 145,057 - Mortgage banking derivative assets 650 - - 650 Interest rate swap assets 7,660 - 7,660 - Liabilities Mortgage banking derivative liabilities 251 - - 251 Interest rate swap liabilities 7,660 - 7,660 - The following summarizes the valuation techniques for assets recorded in the consolidated statements of financial condition at their fair value on a recurring basis: Available-for-sale securities – The Company’s investment securities classified as available for sale include: mortgage-backed securities, collateralized mortgage obligations, government sponsored enterprise bonds, municipal securities and other debt securities. The fair value of mortgage-backed securities, collateralized mortgage obligations and government sponsored enterprise bonds are determined by a third party valuation source using observable market data utilizing a matrix or multi-dimensional relational pricing model. Standard inputs to these models include observable market data such as benchmark yields, reported trades, broker quotes, issuer spreads, benchmark securities, prepayment models and bid/offer market data. For securities with an early redemption feature, an option adjusted spread model is utilized to adjust the issuer spread. These model and matrix measurements are classified as Level 2 in the fair value hierarchy. The fair value of municipal and other debt securities is determined by a third party valuation source using observable market data utilizing a multi-dimensional relational pricing model. Standard inputs to this model include observable market data such as benchmark yields, reported trades, broker quotes, rating updates and issuer spreads. These model measurements are classified as Level 2 in the fair value hierarchy. The change in fair value is recorded through an adjustment to the statement of comprehensive income. 28 Table of Contents Loans held for sale – The Company carries loans held for sale at fair value under the fair value option model. Fair value is generally determined by estimating a gross premium or discount, which is derived from pricing currently observable in the secondary market, principally from observable prices for forward sale commitments. Loans held-for-sale are considered to be Level 2 in the fair value hierarchy of valuation techniques. The change in fair value is recorded through an adjustment to the statement of income. Mortgage banking derivatives - Mortgage banking derivatives include interest rate lock commitments to originate residential loans held for sale to individual customers and forward commitments to sell residential mortgage loans to various investors. The Company utilizes a valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale, which includes applying a pull through rate based upon historical experience and the current interest rate environment and then multiplying by quoted investor prices. The Company also utilizes a valuation model to estimate the fair value of its forward commitments to sell residential loans, which includes matching specific terms and maturities of the forward commitments against applicable investor pricing available. While there are Level 2 and 3 inputs used in the valuation models, the Company has determined that one or more of the inputs significant in the valuation of both of the mortgage banking derivatives fall within Level 3 of the fair value hierarchy. The change in fair value is recorded through an adjustment to the statement of income. Interest rate swap assets/liabilities - The Company offers loan level swaps to its customers and offsets its exposure from such contracts by entering into mirror image swaps with a financial institution / swap counterparty. The fair values of derivatives are based on valuation models using observable market data as of the measurement date. Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third -party pricing services. Interest rate swap assets and liabilities are considered to be Level 2 in the fair value hierarchy of valuation techniques. The change in fair value is recorded through an adjustment to the statement of operations, within other income and other expense. The table below presents reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3 ) during 2026 and 2025 . Three months ended June 30, Six months ended June 30, 2026 2025 2026 2025 (In Thousands) (In Thousands) Mortgage derivative, net balance at the beginning of the period $ 1,318 $ 595 $ 399 $ 851 Mortgage derivative (loss) gain, net ( 558 ) ( 260 ) 361 ( 516 ) Mortgage derivative, net balance at the end of the period $ 760 $ 335 $ 760 $ 335 There were no transfers in or out of Level 1, 2 or 3 measurements during the periods. 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, 2026 and December 31, 2025 , and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value. Fair Value Measurements Using June 30, 2026 Level 1 Level 2 Level 3 (In Thousands) Real estate owned $ 318 $ - $ - $ 318 Fair Value Measurements Using December 31, 2025 Level 1 Level 2 Level 3 (In Thousands) Real estate owned $ 424 $ - $ - $ 424 29 Table of Contents Real estate owned – On a non-recurring basis, real estate owned is recorded in the consolidated statements of financial condition at the lower of cost or fair value. Fair value is determined based on third party appraisals and, if less than the carrying value of the foreclosed loan, the carrying value of the real estate owned is adjusted to the fair value. Appraised values are adjusted to consider disposition costs and also to take into consideration the age of the most recent appraisal. Given the significance of the adjustments made to appraised values necessary to estimate the fair value of the properties, real estate owned is considered to be Level 3 in the fair value hierarchy of valuation techniques. Mortgage servicing rights – The Company utilizes an independent valuation from a third party which uses a discounted cash flow model to estimate the fair value of mortgage servicing rights. The model utilizes prepayment assumptions to project cash flows related to the mortgage servicing rights based upon the current interest rate environment, which is then discounted to estimate an expected fair value of the mortgage servicing rights. The model considers characteristics specific to the underlying mortgage portfolio, such as: contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges and costs to service. Given the significance of the unobservable inputs utilized in the estimation process, mortgage servicing rights are classified as Level 3 within the fair value hierarchy. 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, 2026 and December 31, 2025 , the significant unobservable inputs used in the fair value measurements were as follows: Significant Unobservable Input Value Fair Value at Significant June 30, Valuation Unobservable Minimum Maximum Weighted 2026 Technique Inputs Value Value Average (Dollars in Thousands) Mortgage banking derivatives $ 760 Pricing models Pull through rate 71.0 % 100.0 % 89.6 % Real estate owned 318 Market approach Discount rates applied to appraisals 30.8 % 30.8 % 30.8 % December 31, 2025 Mortgage banking derivatives $ 399 Pricing models Pull through rate 69.1 % 99.6 % 87.6 % Real estate owned 424 Market approach Discount rates applied to appraisals 14.1 % 57.1 % 32.3 % A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. Fair value information about financial instruments follows, whether or not recognized in the consolidated statements of financial condition, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. 30 Table of Contents The carrying amounts and fair values of the Company’s financial instruments consist of the following: June 30, 2026 December 31, 2025 Carrying Fair Value Carrying Fair Value amount Total Level 1 Level 2 Level 3 amount Total Level 1 Level 2 Level 3 (In Thousands) Financial Assets Cash and cash equivalents $ 38,201 $ 38,201 $ 38,201 $ - $ - $ 71,107 $ 71,107 $ 71,107 $ - $ - Loans receivable 1,683,881 1,661,155 - - 1,661,155 1,675,552 1,632,248 - - 1,632,248 FHLB stock 19,226 19,226 19,226 - - 19,804 19,804 19,804 - - Accrued interest receivable 8,151 8,151 8,151 - - 8,331 8,331 8,331 - - Mortgage servicing rights 1,142 1,533 - - 1,533 1,030 1,294 - - 1,294 Financial Liabilities Deposits 1,420,981 1,420,692 525,553 895,139 - 1,437,272 1,436,939 504,626 932,313 - Advance payments by borrowers for taxes 18,772 18,772 18,772 - - 2,996 2,996 2,996 - - Borrowings 412,000 409,621 - 409,621 - 412,258 408,434 - 408,434 - Accrued interest payable 4,107 4,107 4,107 - - 3,558 3,558 3,558 - - The following methods and assumptions were used by the Company in determining its fair value disclosures for financial instruments. Cash and Cash Equivalents The carrying amount reported in the consolidated statements of financial condition for cash and cash equivalents is a reasonable estimate of fair value. Loans Receivable The fair value estimation process for the loan portfolio uses an exit price concept and reflects discounts the Company believes are consistent with discounts in the marketplace. Fair values are estimated for portfolios of loans with similar characteristics. Loans are segregated by type such as one - to four -family, multi-family, home equity, construction and land, commercial real estate, commercial, and other consumer. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for similar maturities. The fair value analysis also includes other assumptions to estimate fair value, intended to approximate those a market participant would use in an orderly transaction, with adjustments for discount rates, interest rates, liquidity, and credit spreads, as appropriate. FHLB Stock For FHLB stock, the carrying amount is the amount at which shares can be redeemed with the FHLB and is a reasonable estimate of fair value. Deposits and Advance Payments by Borrowers for Taxes The fair values for interest-bearing and noninterest-bearing negotiable order of withdrawal accounts, savings accounts, and money market accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates of similar remaining maturities to a schedule of aggregated expected monthly maturities of the outstanding certificates of deposit. The advance payments by borrowers for taxes are equal to their carrying amounts at the reporting date. Borrowings Fair values for borrowings are estimated using a discounted cash flow calculation that applies current interest rates to estimated future cash flows of the borrowings. Accrued Interest Payable and Accrued Interest Receivable For accrued interest payable and accrued interest receivable, the carrying amount is a reasonable estimate of fair value. Commitments to Extend Credit and Standby Letters of Credit Commitments to extend credit and standby letters of credit are generally not marketable. Furthermore, interest rates on any amounts drawn under such commitments would be generally established at market rates at the time of the draw. 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, 2026 and December 31, 2025 . 31 Table of Contents Note 12 – Segment Reporting The Company has determined that it has two reportable segments: community banking and mortgage banking. The Company's operating segments are presented based on its management structure and management accounting practices. The structure and practices are specific to the Company and therefore, the financial results of the Company's business segments are not necessarily comparable with similar information for other financial institutions. Community Banking The community banking segment provides consumer and business banking products and services to customers primarily within Southeastern Wisconsin. Within this segment, the following products and services are provided: ( 1 ) lending solutions such as residential mortgages, home equity loans and lines of credit, personal and installment loans, real estate financing, business loans, and business lines of credit; ( 2 ) deposit and transactional solutions such as checking, credit, debit and pre-paid cards, online banking and bill pay, and money transfer services; ( 3 ) investable funds solutions such as savings, money market deposit accounts, IRA accounts, certificates of deposit, and ( 4 ) fixed and variable annuities, insurance as well as trust and investment management accounts. Consumer products include loan and deposit products: mortgage, home equity loans and lines, personal term loans, demand deposit accounts, interest bearing transaction accounts and time deposits. Consumer products also include personal investment services. Business banking products include secured and unsecured lines and term loans for working capital, inventory and general corporate use, commercial real estate construction loans, demand deposit accounts, interest bearing transaction accounts and time deposits. Mortgage Banking The mortgage banking segment provides residential mortgage loans for the primary purpose of sale on the secondary market. Mortgage banking products and services are provided by offices in 24 states with the ability to lend in 48 states. The Company’s chief executive officer has been identified as the chief operating decision maker (“CODM”). Selected financial and descriptive information is reported to the CODM. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The CODM uses the Community Banking and Mortgage Banking segment's net interest income, non-interest income, non-interest expense, and pre-tax income for making operating decisions, allocating resources (including employees, financial, or capital resources), and assessing performance. Based on the reviews of these two segments and other company-wide initiatives, the CODM is informed about allocation of resources to the Holding Company and Other segment. 32 Table of Contents Presented below is the segment information: As of or for the three months ended June 30, 2026 Holding Community Mortgage Company and Banking Banking Other Consolidated (In Thousands) Net interest income $ 15,830 $ 164 $ 16 $ 16,010 Provision (credit) for credit losses 248 ( 12 ) - 236 Net interest income after provision (credit) for credit losses 15,582 176 16 15,774 Noninterest income: 2,020 22,363 ( 143 ) 24,240 Noninterest expenses: Compensation, payroll taxes, and other employee benefits 5,612 16,565 ( 203 ) 21,974 Occupancy, office furniture and equipment 942 628 - 1,570 Advertising 251 476 - 727 Data processing 722 557 - 1,279 Communications 105 121 - 226 Professional fees 197 103 - 300 Real estate owned 27 - - 27 Loan processing expense - 817 - 817 Other 741 1,676 42 2,459 Total noninterest expenses 8,597 20,943 ( 161 ) 29,379 Income before income tax expense 9,005 1,596 34 10,635 Income tax expense 1,741 425 7 2,173 Net income $ 7,264 $ 1,171 $ 27 $ 8,462 Total Assets $ 2,239,536 $ 185,807 $ ( 172,584 ) $ 2,252,759 As of or for the three months ended June 30, 2025 Holding Community Mortgage Company and Banking Banking Other Consolidated (In Thousands) Net interest income $ 13,640 $ 53 $ 15 $ 13,708 Provision (credit) for credit losses ( 19 ) 10 - ( 9 ) Net interest income after provision (credit) for credit losses 13,659 43 15 13,717 Noninterest income: 1,686 22,643 - 24,329 Noninterest expenses: Compensation, payroll taxes, and other employee benefits 5,027 16,312 ( 218 ) 21,121 Occupancy, office furniture and equipment 920 833 - 1,753 Advertising 219 527 - 746 Data processing 806 507 - 1,313 Communications 99 158 - 257 Professional fees 196 303 1 500 Real estate owned ( 8 ) - - ( 8 ) Loan processing expense - 817 - 817 Other 466 1,230 182 1,878 Total noninterest expenses 7,725 20,687 ( 35 ) 28,377 Income before income tax expense 7,620 1,999 50 9,669 Income tax expense 1,400 531 11 1,942 Net income $ 6,220 $ 1,468 $ 39 $ 7,727 Total Assets $ 2,480,038 $ 197,497 $ ( 420,975 ) $ 2,256,560 33 Table of Contents As of or for the six months ended June 30, 2026 Holding Community Mortgage Company and Banking Banking Other Consolidated (In Thousands) Net interest income $ 31,056 $ 378 $ 39 $ 31,473 Provision (credit) for credit losses 532 ( 32 ) - 500 Net interest income after provision (credit) for credit losses 30,524 410 39 30,973 Noninterest income: 3,173 41,484 ( 189 ) 44,468 Noninterest expenses: Compensation, payroll taxes, and other employee benefits 11,187 31,036 ( 407 ) 41,816 Occupancy, office furniture and equipment 2,045 1,491 - 3,536 Advertising 463 881 - 1,344 Data processing 1,487 1,047 3 2,537 Communications 217 267 - 484 Professional fees 425 255 3 683 Real estate owned 29 - - 29 Loan processing expense - 1,846 - 1,846 Other 1,339 3,453 187 4,979 Total noninterest expenses 17,192 40,276 ( 214 ) 57,254 Income before income tax expense 16,505 1,618 64 18,187 Income tax expense 3,279 435 14 3,728 Net income $ 13,226 $ 1,183 $ 50 $ 14,459 As of or for the six months ended June 30, 2025 Holding Community Mortgage Company and Banking Banking Other Consolidated (In Thousands) Net interest income $ 26,043 $ 205 $ 36 $ 26,284 Provision (credit) for credit losses ( 537 ) ( 30 ) - ( 567 ) Net interest income after provision (credit) for credit losses 26,580 235 36 26,851 Noninterest income: 3,034 38,374 18 41,426 Noninterest expenses: Compensation, payroll taxes, and other employee benefits 10,239 28,366 ( 437 ) 38,168 Occupancy, office furniture and equipment 1,996 1,686 - 3,682 Advertising 390 1,079 - 1,469 Data processing 1,518 1,005 2 2,525 Communications 199 293 - 492 Professional fees 543 1,676 17 2,236 Real estate owned ( 18 ) - - ( 18 ) Loan processing expense - 1,737 - 1,737 Other 1,062 2,981 393 4,436 Total noninterest expenses 15,929 38,823 ( 25 ) 54,727 Income (loss) before income tax expense 13,685 ( 214 ) 79 13,550 Income tax expense (benefit) 2,827 ( 57 ) 17 2,787 Net income (loss) $ 10,858 $ ( 157 ) $ 62 $ 10,763 34 Table of Contents Item 2. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Information This Quarterly Report on Form 10-Q may contain various forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and similar expressions and verbs in the future tense. These forward-looking statements include, but are not limited to: ● Statements of our goals, intentions and expectations; ● Statements regarding our business plans, prospects, growth and operating strategies; ● Statements regarding the quality of our loan and investment portfolio; and ● Estimates of our risks and future costs and benefits. These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: ● general economic conditions, either nationally or in our market area, including employment prospects, that are different than expected; ● competition among depository and other financial institutions; ● inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or the origination levels in our lending business, or increase the level of defaults, losses or prepayments on loans we have made and make whether held in portfolio or sold in the secondary markets; ● adverse changes in the securities or secondary mortgage markets; ● changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements; ● changes in monetary or fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; ● our ability to manage market risk, credit risk and operational risk in the current economic conditions; ● our ability to enter new markets successfully and capitalize on growth opportunities; ● our ability to successfully integrate acquired entities; ● decreased demand for our products and services; ● changes in tax policies or assessment policies; ● changes in liquidity, including the size and composition of our deposit portfolio, and the percentage of uninsured deposits in the portfolio; ● changes in consumer demand, spending, borrowing and savings habits; ● changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; ● our ability to retain key employees; ● cyber attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information and destroy data or disable our systems; ● technological changes that may be more difficult or expensive than expected; ● the ability of third-party providers to perform their obligations to us; ● the effects of any federal government shutdown; ● the effects of global or national war, conflict or acts of terrorism; ● the ability of the U.S. Government to manage federal debt limits; ● the imposition of tariffs or other domestic or international governmental policies; ● significant increases in our loan losses; ● changes in the financial condition, results of operations or future prospects of issuers of securities that we own; ● changes in our liquidity needs and access to wholesale funding; and ● our ability to access low-cost funding. 35 Table of Contents See also the factors referred to in reports filed by the Company with the Securities and Exchange Commission (particularly those under the caption “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, and as may be described from time to time in the Corporation’s subsequent SEC filings). The risks included here are not exhaustive. Other sections of this report may include additional factors which could adversely affect our business and financial performance. New risks emerge from time to time and it is not possible for management to predict all such risks, nor can it assess the impact of all such risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Overview The following discussion and analysis is presented to assist the reader in understanding and evaluating the Company’s financial condition and results of operations. It is intended to complement the unaudited consolidated financial statements, footnotes, and supplemental financial data appearing elsewhere in this Quarterly Report on Form 10-Q and should be read in conjunction therewith. The detailed discussion in the sections below focuses on the results of operations for the three and six months ended June 30, 2026 and 2025 and the financial condition as of June 30, 2026 compared to the financial condition as of December 31, 2025. As described in the notes to the unaudited consolidated financial statements, we have two reportable segments: community banking and mortgage banking. The community banking segment provides consumer and business banking products and services to customers primarily within Southeastern Wisconsin. Consumer products include loan products, deposit products, and personal investment services. Business banking products include loans for working capital, inventory and general corporate use, commercial real estate construction loans, and deposit accounts. The mortgage banking segment, which is conducted by offices in 24 states through Waterstone Mortgage Corporation, consists of originating residential mortgage loans primarily for sale in the secondary market. Our community banking segment generates the significant majority of our consolidated net interest income and requires the significant majority of our provision for loan losses. Our mortgage banking segment generates the significant majority of our noninterest income and a majority of our noninterest expenses. We have provided below a discussion of the material results of operations for each segment on a separate basis for the three and six months ended June 30, 2026 and 2025, which focuses on noninterest income and noninterest expenses. We have also provided a discussion of the consolidated operations of the Company, which includes the consolidated operations of the Bank and Waterstone Mortgage Corporation, for the same periods. Significant Items There were no significant items that impacted earnings for the three and six months ended June 30, 2026 and 2025. Comparison of Community Banking Segment Results of Operations for the Three Months Ended June 30, 2026 and 2025 Net income totaled $7.3 million for the three months ended June 30, 2026 compared to $6.2 million for the three months ended June 30, 2025. Net interest income increased $2.2 million to $15.8 million for the three months ended June 30, 2026 compared to $13.6 million for the three months ended June 30, 2025. Interest expense on borrowings decreased $566,000 as growth in time deposits allowed us to carry a lower average balance of FHLB advances and interest expense on deposits decreased $932,000 as accounts repriced at a lower rate and transitioned to more money market accounts. There was a provision for credit losses of $248,000 for the three months ended June 30, 2026 compared to a negative provision for credit losses of $19,000 for the three months ended June 30, 2025. The provision for credit losses of $248,000 consisted of a $171,000 provision related to loans and $77,000 provision related to unfunded commitments for the three months ended June 30, 2026. The current quarter increase was primarily due to increases in commercial real estate external qualitative factors. The provision for credit losses related to unfunded loan commitments for the quarter ended June 30, 2026 was due primarily to an increase of business and commercial real estate loans in the loan pipeline balance at quarter end. 36 Table of Contents Compensation, payroll taxes, and other employee benefits expense increased $585,000 to $5.6 million compared to the quarter ending June 30, 2025 primarily due to increased health insurance expense and ESOP expense as the average market price per share increased compared to the prior year. Comparison of Mortgage Banking Segment Results of Operations for the Three Months Ended June 30, 2026 and 2025 Net income totaled $1.2 million for the three months ended June 30, 2026 compared to a net income of $1.5 million for the three months ended June 30, 2025. We originated $621.8 million in mortgage loans held for sale (including sales to the community banking segment) during the three months ended June 30, 2026, which represents an increase of $33.0 million, or 5.6%, from the $588.8 million originated during the three months ended June 30, 2025. Origination volume relative to purchase activity accounted for 88.6% of originations for the quarter ended June 30, 2026 compared to 91.7% of total originations for the quarter ended June 30, 2025. Total mortgage banking noninterest income decreased $280,000, or 1.2%, to $22.4 million during the three months ended June 30, 2026 compared to $22.6 million during the three months ended June 30, 2025. The decrease in mortgage banking noninterest income was related to a decrease in gross margin on loans originated and sold for the three months ended June 30, 2026 compared to June 30, 2025. Gross margin on loans originated and sold is the ratio of mortgage banking income (excluding the change in interest rate lock fair value) divided by total loan originations. We sell loans on both a servicing-released and a servicing-retained basis. Waterstone Mortgage Corporation has contracted with a third party to service the loans for which we retain servicing. Total compensation, payroll taxes and other employee benefits increased $253,000, or 1.6%, to $16.6 million for the three months ended June 30, 2026 compared to $16.3 million for the three months ended June 30, 2025. The increase primarily related to increased commission expense, manager pay expense, production incentive expense, and salary expense offset by a decrease in health insurance expense. Consolidated Waterstone Financial, Inc. Results of Operations Three months ended June 30, 2026 2025 (Dollars In Thousands, except per share amounts) Net income $ 8,462 $ 7,727 Earnings per share - basic 0.49 0.43 Earnings per share - diluted 0.49 0.43 Annualized return on average assets 1.52 % 1.39 % Annualized return on average equity 9.65 % 9.04 % 37 Table of Contents Net Interest Income Average Balance Sheets, Interest and Yields/Costs The following table sets forth average balance sheets, annualized average yields and costs, and certain other information for the periods indicated. Non-accrual loans are included in the computation of the average balances of loans receivable and held for sale. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense. Yields on interest-earning assets are computed on a fully tax-equivalent yield, where applicable. Three months ended June 30, 2026 2025 Average Balance Interest Yield/Cost Average Balance Interest Yield/Cost (Dollars in Thousands) Assets Interest-earning assets: Loans receivable and held for sale (1) $ 1,799,170 $ 26,610 5.93 % $ 1,812,065 $ 25,875 5.73 % Mortgage related securities (2) 185,513 1,479 3.20 % 173,220 1,253 2.90 % Debt securities, federal funds sold and short-term investments(2) (3) 136,901 1,497 4.39 % 131,710 1,557 4.74 % Total interest-earning assets 2,121,584 29,586 5.59 % 2,116,995 28,685 5.43 % Noninterest-earning assets 109,031 105,382 Total assets $ 2,230,615 $ 2,222,377 Liabilities and equity Interest-bearing liabilities: Demand accounts $ 93,170 25 0.11 % $ 89,548 24 0.11 % Money market and savings accounts 354,112 1,909 2.16 % 320,908 1,656 2.07 % Time deposits - retail 817,261 7,280 3.57 % 830,550 8,501 4.11 % Time deposits -brokered 86,441 821 3.81 % 72,533 786 4.35 % Total interest-bearing deposits 1,350,984 10,035 2.98 % 1,313,539 10,967 3.35 % Borrowings 399,510 3,541 3.56 % 437,784 4,010 3.67 % Total interest-bearing liabilities 1,750,494 13,576 3.11 % 1,751,323 14,977 3.43 % Noninterest-bearing liabilities Noninterest-bearing deposits 87,072 85,665 Other noninterest-bearing liabilities 41,506 42,669 Total noninterest-bearing liabilities 128,578 128,334 Total liabilities 1,879,072 1,879,657 Equity 351,543 342,720 Total liabilities and equity $ 2,230,615 $ 2,222,377 Net interest income / Net interest rate spread (4) 16,010 2.48 % 13,708 2.00 % Net interest-earning assets (5) $ 371,090 $ 365,672 Net interest margin (6) 3.03 % 2.60 % Average interest-earning assets to average interest-bearing liabilities 121.20 % 120.88 % __________ (1) Interest income includes net deferred loan fee amortization income of $201,000 and ($55,000) for the three months ended June 30, 2026 and 2025, respectively. (2) Average balance of mortgage related and debt securities are based on amortized historical cost. (3) Yields on tax-exempt municipal securities are not presented on a tax-equivalent basis in this table. The tax-equivalent yields on debt securities, federal funds sold and short-term investments were 4.67% and 4.93% for the three months ended June 30, 2026 and 2025, respectively. (4) 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. (5) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (6) Net interest margin represents net interest income divided by average total interest-earning assets. 38 Table of Contents Rate/Volume Analysis The following table sets forth the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. 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, 2026 versus 2025 Increase (Decrease) due to Volume Rate Net (In Thousands) Interest income: Loans receivable and held for sale(1) (2) $ (189 ) $ 924 $ 735 Mortgage related securities (3) 92 134 226 Other earning assets(3) (4) 70 (130 ) (60 ) Total interest-earning assets (27 ) 928 901 Interest expense: Demand accounts 1 - 1 Money market and savings accounts 178 75 253 Time deposits - retail (133 ) (1,088 ) (1,221 ) Time deposits - brokered 100 (65 ) 35 Total interest-bearing deposits 146 (1,078 ) (932 ) Borrowings (348 ) (121 ) (469 ) Total interest-bearing liabilities (202 ) (1,199 ) (1,401 ) Net change in net interest income $ 175 $ 2,127 $ 2,302 ______________ (1) Interest income includes net deferred loan fee amortization income of $201,000 and ($55,000) for the three months ended June 30, 2026 and 2025, respectively. (2) Non-accrual loans have been included in average loans receivable balance. (3) Includes available for sale securities. Average balance of available for sale securities is based on amortized historical cost. (4) Yields on tax-exempt municipal securities are not presented on a tax-equivalent basis in this table. The tax-equivalent yields on debt securities, federal funds sold and short-term investments were 4.67% and 4.93% for the three months ended June 30, 2026 and 2025, respectively. Net interest income increased $2.3 million, or 16.8%, to $16.0 million during the three months ended June 30, 2026 compared to $13.7 million during the three months ended June 30, 2025 primarily due to increased yields on our loan and securities portfolios as well as decreased cost of deposits and borrowings as replacement rates decreased compared to the prior year period. ● Interest income on loans increased $735,000, or 2.8%, to $26.6 million due primarily to a 20 basis point increase in average yield on loans as loans repricing at higher interest rates. ● Interest expense on retail time deposits decreased $1.2 million, or 14.4%, to $7.3 million primarily due to the 54 basis point decrease in average cost of retail time deposits compared to the prior year period. There was also a $13.3 million decrease in the average balance of retail time deposits. Interest expense on brokered time deposits increased $35,000 due primarily to the increase of $13.9 million in average brokered time deposits. ● Interest expense on money market, savings, and escrow accounts increased $253,000, or 15.3%, to $1.9 million due primarily to the increase in average balance of $33.2 million. Additionally, the average cost of money market, savings, and escrow accounts as rates increased to attract new account openings increased nine basis points. ● Interest expense on borrowings decreased $469,000, or 11.7%, to $3.5 million due to a $38.3 million decrease in the average balance of borrowings during the three months ended June 30, 2026 compared to the three months ended June 30, 2025 as we transitioned to more time deposits and money market accounts. Additionally, the average cost of borrowings decreased by 11 basis points as there were fed funds rate cuts over the past year. 39 Table of Contents Provision for Credit Losses There was a provision for credit losses of $236,000 for the three months ended June 30, 2026 compared to a negative $9,000 provision for credit losses for the three months ended June 30, 2025. The $236,000 provision for credit losses consisted of a $159,000 provision related to loans and a provision related to unfunded commitments of $77,000 for the three months ended June 30, 2026. During the three months ended June 30, 2026, the increase was primarily due to increases in commercial real estate external qualitative factors. The provision for credit losses related to unfunded loan commitments for the quarter ended June 30, 2026 was due primarily to an increase of business and commercial real estate loans in the loan pipeline balance at quarter end. The provision is primarily a function of the Company's reserving methodology and assessments of certain quantitative and qualitative factors which are used to determine an appropriate allowance for credit losses for the period. See further discussion regarding the allowance for loan losses in the "Asset Quality" section for an analysis of charge-offs, nonperforming assets, specific reserves and additional provisions and the "Allowance for Credit Loss" section. Noninterest Income Three months ended June 30, 2026 2025 $ Change % Change (Dollars In Thousands) Service charges on loans and deposits $ 463 $ 413 $ 50 12.1 % Increase in cash surrender value of life insurance 1,135 1,014 121 11.9 % Mortgage banking income 22,144 22,559 (415 ) (1.8 )% Other 498 343 155 45.2 % Total noninterest income $ 24,240 $ 24,329 $ (89 ) (0.4 )% Total noninterest income decreased $89,000 or 0.4%, to $24.2 million during the three months ended June 30, 2026 compared to $24.3 million during the three months ended June 30, 2025. ● The decrease in mortgage banking income was primarily the result of a decrease in gross margin on loans originated offset by an increase 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. Gross margin on loans originated and sold decreased 6.2% at the mortgage banking segment. Total loan origination volume on a consolidated basis increased $25.7 million, or 4.4%, to $614.7 million during the three months ended June 30, 2026 compared to $589.0 million during the three months ended June 30, 2025. ● Other income increased due to a gain on sale of land at the community banking segment. 40 Table of Contents Three months ended June 30, 2026 2025 $ Change % Change (Dollars In Thousands) Compensation, payroll taxes, and other employee benefits $ 21,974 $ 21,121 $ 853 4.0 % Occupancy, office furniture, and equipment 1,570 1,753 (183 ) (10.4 )% Advertising 727 746 (19 ) (2.5 )% Data processing 1,279 1,313 (34 ) (2.6 )% Communications 226 257 (31 ) (12.1 )% Professional fees 300 500 (200 ) (40.0 )% Real estate owned 27 (8 ) 35 (437.5 )% Loan processing expense 817 817 - 0.0 % Other 2,459 1,878 581 30.9 % Total noninterest expenses $ 29,379 $ 28,377 $ 1,002 3.5 % Total noninterest expenses increased $1.0 million, or 3.5%, to $29.4 million during the three months ended June 30, 2026 compared to $28.4 million during the three months ended June 30, 2025. ● Compensation, payroll taxes and other employee benefits expense at our mortgage banking segment increased $253,000, or 1.6%, to $16.6 million during the three months ended June 30, 2026. The increase primarily related to increased commission expense, manager pay expense, production incentive expense, and salary expense offset by a decrease in health insurance expense. ● Compensation, payroll taxes and other employee benefits expense at the community banking segment increased $585,000, or 11.6%, to $5.6 million during the three months ended June 30, 2026. The increase primarily related to increased health insurance expense and ESOP expense as the average market price per share increased compared to the prior year. ● Occupancy, office furniture and equipment expense decreased during the three months ended June 30, 2026, primarily resulting from decreases in rent expense and final snow plowing expenses. ● Professional fees decreased during the three months ended June 30, 2026 primarily related to a decrease in legal fees at the mortgage banking segment. ● Other noninterest expense decreased during the three months ended June 30, 2026 primarily related to an increase in provision for branch losses, provision for loan sale losses, and office expenses. Income Taxes Income tax expense totaled $2.2 million for the three months ended June 30, 2026 compared to $1.9 million during the three months ended June 30, 2025. The increase was primarily due to the increase in pre-tax income. Income tax expense was recognized on the statement of income during the three months ended June 30, 2026 at an effective rate of 20.4% of pretax income compared to the three months ended June 30, 2025 at an effective rate of 20.1% of pretax income. 41 Table of Contents Comparison of Community Banking Segment Results of Operations for the Six Months Ended June 30, 2026 and 2025 Net income totaled $13.2 million for the six months ended June 30, 2026 compared to $10.9 million for the six months ended June 30, 2025. Net interest income increased $5.0 million to $31.1 million for the six months ended June 30, 2026 compared to $26.0 million for the six months ended June 30, 2025. Interest expense on borrowings decreased $1.3 million as growth in average deposits allowed us to carry a lower average balance of FHLB advances along with a decrease in short-term FHLB weighted average cost and interest expense on deposits decreased $1.9 million as accounts repriced at a lower rate and transitioned to more money market accounts. There was a provision for credit losses of $532,000 for the six months ended June 30, 2026 compared to a negative provision for credit losses of $532,000 for the six months ended June 30, 2025. The provision for credit losses of $532,000 consisted of a $411,000 provision related to loans and $121,000 provision related to unfunded commitments for the six months ended June 30, 2026. The increase was primarily due to increases in multi-family, commercial real estate, and construction loan balances along with an increase in multifamily and commercial real estate qualitative factors. The provision for credit losses related to unfunded loan commitments was due primarily to an increase in the loan pipeline balance at the current quarter end compared to the prior year end. 42 Table of Contents Compensation, payroll taxes, and other employee benefits expense increased $948,000 to $11.2 million for the six months ended June 30, 2026 compared to $10.2 million for the six months ended June 30, 2025. primarily due to increases in health insurance, salary expense from annual raises, variable compensation, restricted stock expense due to new directors and executive grants, and ESOP compensation as average share price has risen year-over-year. Comparison of Mortgage Banking Segment Results of Operations for the Six Months Ended June 30, 2026 and 2025 Net income totaled $1.2 million for the six months ended June 30, 2026 compared to a net loss of $157,000 for the six months ended June 30, 2025. We originated $1.13 billion in mortgage loans held for sale (including sales to the community banking segment) during the six months ended June 30, 2026, which represents an increase of $153.6 million, or 15.7%, from the $976.6 million originated during the six months ended June 30, 2025. The increase in loan production volume was driven by a $47.3 million, or 5.4%, increase in purchase products and a $106.2 million, or 106.3%, increase in refinance products. Loans originated for the purchase of a residential property comprised 82.0% of total originations during the six months ended June 30, 2026, compared to 90.0% of total originations during the six months ended June 30, 2025, respectively. Total mortgage banking noninterest income increased $3.1 million, or 8.1%, to $41.5 million during the six months ended June 30, 2026 compared to $38.4 million during the six months ended June 30, 2025. The increase in mortgage banking noninterest income was related to a 15.7% increase in volume and was partially offset by a 7.0% decrease in gross margin on loans originated and sold for the six months ended June 30, 2026 compared to June 30, 2025. Gross margin on loans originated and sold is the ratio of mortgage banking income (excluding the change in interest rate lock fair value) divided by total loan originations. We sell loans on both a servicing-released and a servicing-retained basis. Waterstone Mortgage Corporation has contracted with a third party to service the loans for which we retain servicing. Total compensation, payroll taxes and other employee benefits increased $2.7 million, or 9.4%, to $31.0 million for the six months ended June 30, 2026 compared to $28.4 million for the six months ended June 30, 2025. The increase primarily related to increased commission expense due to an increase in fundings, manager pay expense as profitability improved, production incentive expense, and salary expense offset by a decrease in health insurance expense. Consolidated Waterstone Financial, Inc. Results of Operations Six months ended June 30, 2026 2025 (Dollars In Thousands, except per share amounts) Net income $ 14,459 $ 10,763 Earnings per share - basic 0.84 0.59 Earnings per share - diluted 0.84 0.59 Annualized return on average assets 1.31 % 0.99 % Annualized return on average equity 8.26 % 6.32 % 43 Table of Contents Net Interest Income Average Balance Sheets, Interest and Yields/Costs The following table sets forth average balance sheets, annualized average yields and costs, and certain other information for the periods indicated. Non-accrual loans are included in the computation of the average balances of loans receivable and held for sale. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense. Yields on interest-earning assets are computed on a fully tax-equivalent yield, where applicable. Six months ended June 30, 2026 2025 Average Balance Interest Yield/Cost Average Balance Interest Yield/Cost (Dollars in Thousands) Assets Interest-earning assets: Loans receivable and held for sale (1) $ 1,793,982 $ 52,561 5.91 % $ 1,790,461 $ 50,953 5.74 % Mortgage related securities (2) 184,751 2,933 3.20 % 172,090 2,444 2.86 % Debt securities, federal funds sold and short-term investments (2) (3) 137,378 3,107 4.56 % 127,379 3,043 4.82 % Total interest-earning assets 2,116,111 58,601 5.58 % 2,089,930 56,440 5.45 % Noninterest-earning assets 108,743 105,094 Total assets $ 2,224,854 $ 2,195,024 Liabilities and equity Interest-bearing liabilities: Demand accounts $ 91,660 48 0.11 % $ 88,477 46 0.10 % Money market and savings accounts 348,793 3,811 2.20 % 310,853 3,215 2.09 % Time deposits - retail 817,142 14,689 3.63 % 824,614 17,253 4.22 % Time deposits - brokered 98,251 1,860 3.82 % 84,749 1,785 4.25 % Total interest-bearing deposits 1,355,846 20,408 3.04 % 1,308,693 22,299 3.44 % Borrowings 388,535 6,720 3.49 % 417,531 7,857 3.79 % Total interest-bearing liabilities 1,744,381 27,128 3.14 % 1,726,224 30,156 3.52 % Noninterest-bearing liabilities Noninterest-bearing deposits 88,018 83,033 Other noninterest-bearing liabilities 39,245 42,507 Total noninterest-bearing liabilities 127,263 125,540 Total liabilities 1,871,644 1,851,764 Equity 353,210 343,260 Total liabilities and equity $ 2,224,854 $ 2,195,024 Net interest income / Net interest rate spread (4) 31,473 2.44 % 26,284 1.93 % Net interest-earning assets (5) $ 371,730 $ 363,706 Net interest margin (6) 3.00 % 2.54 % Average interest-earning assets to average interest-bearing liabilities 121.31 % 121.07 % __________ (1) Interest income includes net deferred loan fee amortization income of $387,000 and $151,000 for the six months ended June 30, 2026 and 2025, respectively. (2) Average balance of mortgage related and debt securities are based on amortized historical cost. (3) Yields on tax-exempt municipal securities are not presented on a tax-equivalent basis in this table. The tax-equivalent yields on debt securities, federal funds sold and short-term investments were 4.83% and 5.01% for the six months ended June 30, 2026 and 2025, respectively. (4) 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. (5) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (6) Net interest margin represents net interest income divided by average total interest-earning assets. 44 Table of Contents Rate/Volume Analysis The following table sets forth the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. 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. Six months ended June 30, 2026 versus 2025 Increase (Decrease) due to Volume Rate Net (In Thousands) Interest income: Loans receivable and held for sale(1) (2) $ 100 $ 1,508 $ 1,608 Mortgage related securities(3) 187 302 489 Other earning assets(3) (4) 234 (170 ) 64 Total interest-earning assets 521 1,640 2,161 Interest expense: Demand accounts 6 (4 ) 2 Money market and savings accounts 416 180 596 Time deposits - retail (156 ) (2,408 ) (2,564 ) Time deposits - brokered 205 (130 ) 75 Total interest-bearing deposits 471 (2,362 ) (1,891 ) Borrowings (531 ) (606 ) (1,137 ) Total interest-bearing liabilities (60 ) (2,968 ) (3,028 ) Net change in net interest income $ 581 $ 4,608 $ 5,189 ______________ (1) Interest income includes net deferred loan fee amortization income of $387,000 and $151,000 for the six months ended June 30, 2026 and 2025, respectively. (2) Non-accrual loans have been included in average loans receivable balance. (3) Includes available for sale securities. Average balance of available for sale securities is based on amortized historical cost. (4) Yields on tax-exempt municipal securities are not presented on a tax-equivalent basis in this table. The tax-equivalent yields on debt securities, federal funds sold and short-term investments were 4.83% and 5.01% for the six months ended June 30, 2026 and 2025, respectively. Net interest income increased $5.2 million, or 19.7%, to $31.5 million during the six months ended June 30, 2026 compared to $26.3 million during the six months ended June 30, 2025 primarily due to increased yields on our loan and securities portfolios as well as decreased cost of deposits and borrowings as replacement rates decreased compared to the prior year period. ● Interest income on loans increased $1.6 million, or 3.2%, to $52.6 million due primarily to a 17 basis point increase in average yield on loans as loans repricing at higher interest rates. ● Interest expense on retail time deposits decreased $2.6 million, or 14.9%, to $14.7 million primarily due to the 59 basis point decrease in average cost of retail time deposits compared to the prior year period. There was also a $7.5 million decrease in the average balance of retail time deposits. Interest expense on brokered time deposits increased $75,000 due to the increase of $13.5 million in average brokered time deposits. ● Interest expense on money market, savings, and escrow accounts increased $596,000, or 18.5%, to $3.8 million due primarily to the increase in the average balance of $37.9 million. Additionally, the average cost of money market, savings, and escrow accounts as rates increased 11 basis points to attract new account openings. ● Interest expense on borrowings decreased $1.1 million, or 14.5%, to $6.7 million due to a $29.0 million decrease in the average balance of borrowings during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 as we transitioned to more time deposits and money market accounts. Additionally, the average cost of borrowings decreased by 30 basis points as there were fed funds rate cuts over the past year. 45 Table of Contents Provision for Credit Losses There was a provision for credit losses of $500,000 for the six months ended June 30, 2026 compared to a negative $567,000 provision for credit losses for the six months ended June 30, 2025. The $500,000 provision for credit losses consisted of a $379,000 provision related to loans and a provision related to unfunded commitments of $121,000 for the six months ended June 30, 2026. The increase was primarily due to increases in multi-family, commercial real estate, and construction loan balances along with an increase in multifamily and commercial real estate qualitative factors. The provision for credit losses related to unfunded loan commitments was due primarily to an increase in the loan pipeline balance at the current quarter end compared to the prior year end. The provision is primarily a function of the Company's reserving methodology and assessments of certain quantitative and qualitative factors which are used to determine an appropriate allowance for credit losses for the period. See further discussion regarding the allowance for loan losses in the "Asset Quality" section for an analysis of charge-offs, nonperforming assets, specific reserves and additional provisions and the "Allowance for Credit Loss" section. Noninterest Income Six months ended June 30, 2026 2025 $ Change % Change (Dollars In Thousands) Service charges on loans and deposits $ 837 $ 1,006 $ (169 ) (16.8 )% Increase in cash surrender value of life insurance 1,684 1,495 189 12.6 % Mortgage banking income 41,094 38,287 2,807 7.3 % Other 853 638 215 33.7 % Total noninterest income $ 44,468 $ 41,426 $ 3,042 7.3 % Total noninterest income increased $3.0 million or 7.3%, to $44.5 million during the three months ended June 30, 2026 compared to $41.4 million during the three months ended June 30, 2025. ● The decrease in service charges on loans and deposits was primarily due to a decrease in loan prepayment penalties. ● The increase in the increase in cash surrender value of life insurance is primarily due to an increase in dividend rate. ● The increase in mortgage banking income was primarily the result of an increase in loan origination volumes offset by a decrease in gross margin on loans originated. Total loan origination volume on a consolidated basis increased $143.5 million, or 14.7%, to $1.12 billion during the six months ended June 30, 2026 compared to $976.7 million during the six months ended June 30, 2025. Offsetting the increase in originations, gross margin on loans originated and sold decreased at the mortgage banking segment. 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. See "Comparison of Mortgage Banking Segment Results of Operations for the Six Months Ended June 30, 2026 and 2025" above for additional discussion of the increase in mortgage banking income. ● The increase in other income was primarily due to a sale of land at the community banking segment and servicing fee income. 46 Table of Contents Six months ended June 30, 2026 2025 $ Change % Change (Dollars In Thousands) Compensation, payroll taxes, and other employee benefits $ 41,816 $ 38,168 $ 3,648 9.6 % Occupancy, office furniture, and equipment 3,536 3,682 (146 ) (4.0 )% Advertising 1,344 1,469 (125 ) (8.5 )% Data processing 2,537 2,525 12 0.5 % Communications 484 492 (8 ) (1.6 )% Professional fees 683 2,236 (1,553 ) (69.5 )% Real estate owned 29 (18 ) 47 (261.1 )% Loan processing expense 1,846 1,737 109 6.3 % Other 4,979 4,436 543 12.2 % Total noninterest expenses $ 57,254 $ 54,727 $ 2,527 4.6 % Total noninterest expenses increased $2.5 million, or 4.6%, to $57.3 million during the six months ended June 30, 2026 compared to $54.7 million during the six months ended June 30, 2025. ● Compensation, payroll taxes and other employee benefits expense at our community banking segment increased $948,000, or 9.3%, to $11.2 million during the six months ended June 30, 2026. The increase primarily related to increased commission expense due to an increase in fundings, manager pay expense as profitability improved, production incentive expense, and salary expense offset by a decrease in health insurance expense. ● Compensation, payroll taxes and other employee benefits expense at the mortgage banking segment increased $2.7 million, or 9.4%, to $31.0 million for the six months ended June 30, 2026 compared to $28.4 million for the six months ended June 30, 2025. The increase primarily related to increased commission expense due to an increase in fundings, manager pay expense as profitability improved, production incentive expense, and salary expense offset by a decrease in health insurance expense. ● Occupancy, office furniture and equipment expense decreased during the six months ended June 30, 2026, primarily due to a decrease in rent expense offset by an increase in depreciation expense. ● Professional fees decreased during the six months ended June 30, 2026 primarily due to a decrease in legal fees at the mortgage banking segment as a settlement related to a prior year dispute was finalized during the six months ended March 31, 2025. ● Other noninterest expense increased during the six months ended June 30, 2026 due primarily related to an increase in provision for loan sale losses, due and subscriptions, and amortization of mortgage servicing rights. Income Taxes Income tax expense totaled $3.7 million for the six months ended June 30, 2026 compared to $2.8 million during the six months ended June 30, 2025. The increase was primarily due to the increase in pre-tax income. Income tax expense was recognized on the statement of income during the six months ended June 30, 2026 at an effective rate of 20.5% of pretax income compared to the six months ended June 30, 2025 at an effective rate of 20.6% of pretax income. 47 Table of Contents Comparison of Financial Condition at June 30, 2026 and December 31, 2025 Total Assets – Total assets decreased by $6.7 million, or 0.3%, to $2.25 billion at June 30, 2026 from $2.26 billion at December 31, 2025. The decrease in total assets primarily reflects a decrease in cash and cash equivalents, partially offset by increases in loans receivable, loans held for sale, and securities available for sale. Cash and Cash Equivalents – Cash and cash equivalents decreased $32.9 million, or 46.3%, to $38.2 million at June 30, 2026, compared to $71.1 million at December 31, 2025. The decrease in cash and cash equivalents primarily reflects the increase in loans receivable, loans held for sale, and securities available for sale along with the decrease in deposits. Securities Available for Sale – Securities available for sale increased $6.5 million to $237.3 million at June 30, 2026. The increase was primarily due to the purchases of securities exceeding paydowns and maturities offset by a decrease in fair value as longer term interest rates increased compared to prior year end. Loans Held for Sale - Loans held for sale increased $6.6 to $151.7 million at June 30, 2026 as seasonal house buying activity increased. Loans Receivable - Loans receivable held for investment increased $8.3 million to $1.68 billion at June 30, 2026. The increase in total loans receivable was primarily attributable to increases in each of the multi-family, construction, and commercial loan categories offset by decreases in the one-to-four family and commercial real estate loan categories. The following table shows loan originations during the periods indicated. For the Six months ended June 30, 2026 2025 (In Thousands) Real estate loans originated for investment: Residential One- to four-family $ 36,169 $ 4,741 Multi-family 94,407 57,497 Home equity 3,953 2,369 Construction and land 138 3,065 Commercial real estate 51,319 12,092 Total real estate loans originated for investment 185,986 79,764 Consumer loans originated for investment - - Commercial business loans originated for investment 873 2,259 Total loans originated for investment $ 186,859 $ 82,023 48 Table of Contents Allowance for Credit Losses - Loans - The allowance for credit losses increased to $17.9 million at June 30, 2026. There was a $379,000 provision for credit losses - loans for the six months ended June 30, 2026. See Note 3 - Loans Receivable of the notes to unaudited consolidated financial statements for further discussion on the allowance for credit losses. Prepaid expenses and other assets – Total prepaid expenses and other assets increased $3.9 million to $41.9 million at June 30, 2026. The increase was primarily due to increases in mortgage investor receivables, accounts receivable, back-to-back loan swap fair value adjustment, and the deferred tax asset for unrealized losses as long term interest rates increased. Deposits – Total deposits decreased $16.3 million to $1.42 billion at June 30, 2026. The increase was driven by a decrease of $37.2 million in time deposits offset by increases of $6.4 million in demand deposits and $14.5 million in money market and savings deposits. Borrowings – Total borrowings decreased $258,000, or 0.1%, to $412.0 million at June 30, 2026. The community banking segment increased its FHLB long-term borrowings by $103.0 million, decreased its short-term FHLB borrowings by $23.7 million, and paid off $80.0 million in long-term FHLB borrowings. External short-term borrowings at the mortgage banking segment increased by a total of $435,000 at June 30, 2026 from December 31, 2025. Advance Payments by Borrowers for Taxes - Advance payments by borrowers for taxes increased $15.8 million to $18.8 million at June 30, 2026. The increase was the result of payments received from borrowers for their real estate taxes and is seasonally normal, as balances increase during the course of the calendar year until real estate tax obligations are paid in the fourth quarter. Other Liabilities - Other liabilities decreased $7.7 million to $49.9 million at June 30, 2026. Other liabilities decreased primarily due to a seasonal decrease in outstanding checks related to advance payments by borrowers for taxes. The Company receives payments from borrowers for their real estate taxes during the course of the calendar year until real estate tax obligations are paid in the fourth quarter. At the time at which the disbursements are made, the outstanding checks are classified as other liabilities in the statements of financial condition, and these amounts remain classified as other liabilities until settled. Shareholders ’ Equity – Shareholders' equity increased $1.7 million to $351.1 million at June 30, 2026. Shareholders' equity increased primarily due to net income offset by a decrease in the fair value of securities, shares repurchased, and dividends declared during the period. 49 Table of Contents ASSET QUALITY NONPERFORMING ASSETS At June 30, At December 31, 2026 2025 (Dollars in Thousands) Non-accrual loans: Residential One- to four-family $ 6,179 $ 5,861 Over four-family 239 177 Home equity - 14 Construction and land - - Commercial real estate 118 123 Commercial - - Consumer - - Total non-accrual loans 6,536 6,175 Real estate owned One- to four-family - 106 Commercial real estate 318 318 Total real estate owned 318 424 Total nonperforming assets $ 6,854 $ 6,599 Total non-accrual loans to total loans, net 0.39 % 0.37 % Total non-accrual loans to total assets 0.29 % 0.27 % Total nonperforming assets to total assets 0.30 % 0.29 % All loans that are 90 days or more past due with respect to principal and interest are recognized as non-accrual. Troubled debt restructurings that are non-accrual, either due to being past due greater than 90 days or which have not yet performed under the modified terms for a reasonable period of time, are included in the table above. In addition, loans that are past due less than 90 days are evaluated to determine the likelihood of collectability given other credit risk factors such as early stage delinquency, the nature of the collateral or the results of a borrower review. When the collection of all contractual principal and interest is determined to be unlikely, the loan is moved to non-accrual status and an updated appraisal of the underlying collateral is ordered. This process generally takes place when a loan is contractually past due between 60 and 89 days. A loan is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans and leases deemed collateral-dependent, the Company elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, the Company records a specific valuation allowance or a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral consists of various types of real estate including residential and commercial properties. 50 Table of Contents The following table sets forth activity in our non-accrual loans for the periods indicated. At or for the Six Months Ended June 30, 2026 2025 (In Thousands) Balance at beginning of period $ 6,175 $ 5,665 Additions 3,361 3,578 Transfers to real estate owned - - Charge-offs - - Returned to accrual status (1,071 ) (983 ) Principal paydowns and other (1,929 ) (64 ) Balance at end of period $ 6,536 $ 8,196 Of the $6.5 million in total non-accrual loans as of June 30, 2026, $4.7 million in loans have been specifically reviewed to assess whether a specific valuation allowance is necessary. A specific valuation allowance is established for an amount equal to the impairment when the carrying value of the loan exceeds the present value of expected future cash flows, discounted at the loan's original effective interest rate or the fair value of the underlying collateral with an adjustment made for costs to dispose of the asset. Based upon these specific reviews, no charge-offs have been recorded over the life of these loans and there were no specific reserves as of June 30, 2026. The remaining $1.8 million of non-accrual loans were reviewed on an aggregate basis as of June 30, 2026. The outstanding principal balance of our five largest non-accrual loans as of June 30, 2026 totaled $3.2 million, which represents 48.9% of total non-accrual loans as of that date. The loans held for investment at the mortgage segment were reviewed on an aggregate basis. Interest payments received are treated as interest income on a cash basis as long as the remaining book value of the loan (i.e., after charge-off of all identified losses) is deemed to be fully collectible. If the remaining book value is not deemed to be fully collectible, all payments received are applied to unpaid principal. Determination as to the ultimate collectability of the remaining book value is supported by an updated credit department evaluation of the borrower's financial condition and prospects for repayment, including consideration of the borrower's sustained historical repayment performance and other relevant factors. As of June 30, 2026 and December 31, 2025, there were no loans 90 or more days past due and still accruing interest. 51 Table of Contents LOAN DELINQUENCY The following table summarizes loan delinquency in total dollars and as a percentage of the total loan portfolio: At June 30, At December 31, 2026 2025 (Dollars in Thousands) Loans past due less than 90 days $ 6,325 $ 9,575 Loans past due 90 days or more 4,298 4,832 Total loans past due $ 10,623 $ 14,407 Total loans past due to total loans receivable 0.63 % 0.86 % Past due loans decreased by $3.8 million, or 26.3%, to $10.6 million at June 30, 2026 from $14.4 million at December 31, 2025. Loans past due less than 90 days decreased by $3.3 million, or 33.9%, primarily due to a decrease in the one-to four-family loan category. Loans past due 90 days or more decreased by $534,000, or 11.1%, primarily in the one-to four-family loan category during the six months ended June 30, 2026. 52 Table of Contents ALLOWANCE FOR CREDIT LOSSES - LOANS At or for the Six Months Ended June 30, 2026 2025 (Dollars in Thousands) Balance at beginning of period $ 17,478 $ 18,247 Provision (credit) for credit losses - loans 379 (469 ) Charge-offs: Mortgage One- to four-family - - Multi family - - Home Equity - - Commercial real estate - - Construction and land - - Consumer 15 25 Commercial - - Total charge-offs 15 25 Recoveries: Mortgage One- to four-family 36 37 Multi family 3 - Home Equity - - Commercial real estate - - Construction and land 2 2 Consumer 1 8 Commercial - - Total recoveries 42 47 Net charge-offs (recoveries) (27 ) (22 ) Allowance for credit losses - loans at end of period $ 17,884 $ 17,800 Ratios: Allowance for credit losses to non-accrual loans at end of period 273.62 % 217.18 % Allowance for credit losses to loans receivable at end of period 1.06 % 1.07 % Net recoveries to average loans outstanding (annualized) (0.00 )% (0.00 )% Current year provision (credit) for credit losses - loans to net recoveries (1403.70 )% 2131.82 % Net recoveries (annualized) to beginning of the year allowance (0.31 )% (0.24 )% Our underwriting policies and procedures emphasize that credit decisions must rely on both the credit quality of the borrower and the estimated value of the underlying collateral. Credit quality is assured only when the estimated value of the collateral is objectively determined and is not subject to significant fluctuation. The allowance for credit losses - loans has been determined in accordance with GAAP. We are responsible for the timely and periodic determination of the amount of the allowance required. Any future provisions for loan losses will continue to be based upon our assessment of the overall loan portfolio and the underlying collateral, trends in non-performing loans, current economic conditions and other relevant factors. To the best of management’s knowledge, all probable losses have been provided for in the allowance for credit losses - loans. 53 Table of Contents The establishment of the amount of the allowance for credit loss inherently involves judgments by management as to the appropriateness of the allowance, which ultimately may or may not be correct. Higher than anticipated rates of loan default would likely result in a need to increase provisions in future years. Liquidity and Capital Resources We maintain liquid assets at levels we consider adequate to meet our liquidity needs. We adjust our liquidity levels to fund loan commitments, repay our borrowings, fund deposit outflows and pay real estate taxes on mortgage loans. We also adjust liquidity as appropriate to meet asset and liability management objectives. The level of our liquidity position at any point in time is dependent upon the judgment of the senior management as supported by the Asset/Liability Committee. Liquidity is monitored on a daily, weekly and monthly basis using a variety of measurement tools and indicators. Our primary sources of liquidity are deposits, amortization and repayment of loans, sales of loans held for sale, maturities of investment securities and other short-term investments, and earnings and funds provided from operations. While scheduled principal repayments on loans are a relatively predictable source of funds, deposit flows and loan repayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competitors. We set the interest rates on our deposits to maintain a desired level of total deposits. In addition, we invest excess funds in short-term, interest-earning assets, which provide liquidity to meet lending requirements. Additional sources of liquidity used for the purpose of managing long- and short-term cash flows include advances from the FHLB. During the six months ended June 30, 2026, primary uses of cash and cash equivalents included: $1.12 billion in funding loans held for sale, $8.3 million to fund loans receivable, $14.2 million for purchases of mortgage related securities, $5.7 million for purchases of debt securities, $23.2 million for payoffs of short-term borrowings, $80.0 million for payoffs of long-term borrowings, $16.3 million for a decrease in deposits, $5.5 million for cash dividends paid, and $8.1 million for purchases of our common stock. During the six months ended June 30, 2026, primary sources of cash and cash equivalents included: $1.15 billion in proceeds from the sale of loans held for sale, $103.0 million in long-term borrowings, $13.9 million in principal repayments on mortgage related securities, $2.4 million in sales of FHLB stock, $585,000 in maturities of debt securities, $1.0 million in proceeds from exercised stock options, and $14.5 million in net income. A portion of our liquidity consists of cash and cash equivalents, which are a product of our operating, investing and financing activities. At June 30, 2026 and 2025, respectively, $38.2 million and $70.9 million of our assets were invested in cash and cash equivalents. At June 30, 2026, cash and cash equivalents were comprised of the following: $32.7 million in cash held at the Federal Reserve Bank and other depository institutions and $5.5 million in federal funds sold and short-term investments. Our primary sources of cash are principal repayments on loans, proceeds from the calls and maturities of debt and mortgage-related securities, increases in deposit accounts, advances from the FHLB and the Federal Reserve, and repurchase agreements from other institutions. Liquidity management is both a daily and longer-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLB which provide an additional source of funds. At June 30, 2026, we had $213.0 million in long term advances from the FHLB with contractual maturity dates in 2027, 2028, 2029, 2030, and 2031. See Note 6 - Borrowings of the notes to unaudited consolidated financial statements for additional information about the remaining call option details of our FHLB long-term debt. The Company had approximately $397.9 million of uninsured deposits for approximately 1,551 customers as of June 30, 2026. Uninsured deposit amounts are estimated based on the portions of customer account balances that exceed the FDIC insurance limits. 54 Table of Contents At June 30, 2026, we had outstanding commitments to originate loans receivable of $57.6 million. In addition, at June 30, 2026, we had unfunded commitments under construction loans of $29.6 million, unfunded commitments under business lines of credit of $11.4 million and unfunded commitments under home equity lines of credit and standby letters of credit of $13.2 million. At June 30, 2026, certificates of deposit scheduled to mature in one year or less totaled $864.9 million. Based on prior experience, management believes that, subject to the Bank’s funding needs, a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In the event a significant portion of our deposits is not retained by us, we will have to utilize other funding sources, such as FHLB advances, in order to maintain our level of assets. However, we cannot assure that such borrowings would be available on attractive terms, or at all, if and when needed. Alternatively, we could reduce our level of liquid assets, such as our cash and cash equivalents and securities available-for-sale in order to meet funding needs. In addition, the cost of such deposits may be significantly higher if market interest rates are higher or there is an increased amount of competition for deposits in our market area at the time of renewal. Waterstone Financial, Inc. is a separate legal entity from WaterStone Bank and must provide for its own liquidity to pay dividends to its shareholders, repurchase shares of its common stock, and for other corporate purposes. The primary source of liquidity for Waterstone Financial, Inc. is dividend payments from WaterStone Bank. The ability of WaterStone Bank to pay dividends is subject to regulatory restrictions. At June 30, 2026, Waterstone Financial, Inc. (on an unconsolidated basis) had liquid assets totaling $20.8 million. Capital The Company's Board of Directors authorized a 2.0 million share stock repurchase program on April 27, 2026. As of June 30, 2026, the Company has approximately 2.0 million shares remaining in the program. WaterStone Bank is subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning assets and off-balance sheet items to broad risk categories. At June 30, 2026, WaterStone Bank exceeded all regulatory capital requirements and is considered “well capitalized” under regulatory guidelines. See “Notes to Unaudited Consolidated Financial Statements - Note 7 - Regulatory Capital.” Contractual Obligations, Commitments, Contingent Liabilities, and Off-balance Sheet Arrangements During the three months ended June 30, 2026, we entered into $20.0 million of new long-term debt, repaid $50.0 million of existing long-term debt, and borrowed an additional $28.5 million in short-term debt. See Note 6 - Borrowings of the notes to unaudited consolidated financial statements for additional information about the remaining maturities of our FHLB long-term debt. Our commitments, contingent liabilities, and off-balance sheet arrangements have not changed materially since previously reported in our Annual Report on Form 10-K for the year ended December 31, 2025. See Note 8 - Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities of the notes to unaudited consolidated financial statements for additional information. 55 Table of Contents