Waterstone's Net Interest Margin Reaches 3.03%
Community Banking net interest income hit a record $15.8 million as the margin expanded 6 bps from 2.97% in the first quarter.
Waterstone Financial, Inc. (WSBF), the savings-and-loan holding company for WaterStone Bank, reported net interest margin of 3.03% for the quarter ended June 30, 2026, the highest level since the quarter ended December 31, 2022. The margin rose 6 bps from 2.97% in the first quarter, after a 13 bps expansion from 2.89% in the fourth quarter of 2025.
Chief Executive Officer William Bruss said the lift came from higher yields on loans held for investment and a lower cost of funds, including growth in average transaction deposits. Consolidated net interest income was $16.0 million, up from $13.7 million a year earlier.
The Community Banking segment posted a record $15.8 million of net interest income, a $2.2 million, or 16.1%, increase from $13.6 million a year earlier. That year-over-year gain followed a $2.8 million, or 22.8%, increase to $15.2 million in the first quarter. Segment pre-tax income was $9.0 million.
Average loans held for investment were $1.68 billion, up $9.7 million, or 0.6%, from a year earlier. The company said the increase was primarily due to multi-family mortgages offset by a decrease in single-family mortgages. Average loans declined $2.1 million from the first-quarter average. Weighted average yield on loans receivable and held for sale was 5.93%.
Average core retail deposits, excluding brokered and escrow accounts, were $1.34 billion, up $26.3 million, or 2.0%, from a year earlier. The company attributed the increase primarily to money market and demand balances. Average core retail deposits rose $4.4 million, or 1.3% annualized, from the first quarter. Weighted average cost of interest-bearing deposits fell to 2.98% from 3.09% in the first quarter and 3.35% a year earlier. Retail certificates of deposit cost 3.57% and brokered CDs 3.81%. Average brokered CDs were $86.4 million.
The Community Banking efficiency ratio improved to 48.16% from 50.40% a year earlier. Segment compensation, payroll taxes and other employee benefits rose $585,000, or 11.6%, to $5.6 million, which the company said related primarily to higher health insurance expense and ESOP expense as the average market price per share increased.
The segment recorded a $171,000 provision for credit losses on funded loans, versus a $125,000 credit a year earlier, which the company said was primarily due to increases in commercial real estate external qualitative factors. The consolidated provision was $236,000, versus a $9,000 credit. Nonperforming assets to total assets were 0.30% at June 30, 2026, down from 0.35% at March 31, 2026 and 0.37% a year earlier. Past-due loans to total loans were 0.63%.
Mortgage Banking pre-tax income was $1.6 million, down $403,000, or 20.2%, from $2.0 million a year earlier. Loan originations rose $33.0 million, or 5.6%, to $621.8 million. Gross margin on loans sold compressed to 3.60% from 3.84% a year earlier. The company said the decrease was driven by lower sales margins as secondary-market investors remained concerned about elevated long-term rates. Origination volume relative to purchase activity accounted for 88.6% of originations. Mortgage banking non-interest income was $22.4 million.
Consolidated net income was $8.5 million, or $0.49 a share, versus $7.7 million, or $0.43 a share, a year earlier. Annualized return on average assets was 1.52% and return on average equity 9.65%.
The company returned $6.5 million to shareholders through buybacks and dividends, including a $0.17 quarterly dividend and about 200,000 shares repurchased for $3.7 million, or $18.40 a share. Book value per share was $19.53 at June 30, 2026.
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