Shares of Waterstone Financial, Inc. (WSBF Quick QuoteWSBF - Free Report) have gained 7.2% since the company reported its earnings for the quarter ended Dec. 31, 2025. This compares to the S&P 500 index’s 0.4% decline over the same time frame. Over the past month, the stock has gained 12.4% compared with the S&P 500’s 0.8% growth.

Waterstone Financial reported net income of 44 cents per share for the fourth quarter of 2025, up 57.1% from 28 cents per share in the year-ago period. 

The company also posted 22.4% year-over-year growth in net interest income, reaching $15.7 million. Total noninterest income rose to $21.5 million from $19 million in the prior-year quarter. A negative provision for credit losses of $0.6 million, compared to an expense of $0.4 million a year earlier, further bolstered the bottom line.

Waterstone Financial reported net income of $7.7 million for the fourth quarter, up from $5.2 million in the year-ago period. 

Waterstone Financial, Inc. Price, Consensus and EPS Surprise

Waterstone Financial, Inc. price-consensus-eps-surprise-chart | Waterstone Financial, Inc. Quote

Community Banking Segment Performance

The Community Banking segment was a primary driver of the improved performance. Pre-tax income in this segment surged to $9.1 million, a 35.5% increase from the same quarter in 2024. Net interest income rose 20.4% to $15.5 million, as the segment benefited from a widening net interest margin, which grew to 2.89% from 2.42% a year earlier. The improvement was primarily driven by increased loan yields and reduced borrowing and deposit costs.

Loan growth was relatively modest, with average loans held for investment increasing 1.8% to $1.7 billion. However, year-end balances fell $39.3 million due to several significant construction loan payoffs. Asset quality metrics remained stable, with past due loans representing 0.86% of total loans, slightly below the 0.90% figure a year ago.

The efficiency ratio improved to 49.2% from 51.5% in the fourth quarter of 2024, reflecting greater cost efficiency. Core retail deposits rose 3.8% year over year to $1.3 billion, driven by higher balances in money market and certificate of deposit accounts.

Mortgage Banking Segment Returns to Profitability

The Mortgage Banking segment recorded a pre-tax income of $0.9 million in the fourth quarter, reversing a loss of $0.6 million in the same quarter of the previous year. Loan originations increased 13.6% year over year to $534.6 million, supported by periodic declines in mortgage rates that spurred refinancing activity. Refinances accounted for 21.1% of total originations during the quarter, up from 17.9% in the same period in 2024.

Mortgage Banking income rose to $20.2 million, up 15.6% from $17.5 million a year ago. The gross margin on loans sold improved modestly to 3.8% compared to 3.7% in the fourth quarter of 2024. Compensation and employee benefit expenses increased 12.4% to $15.5 million, mainly due to higher commission payments and health insurance costs.

Management Commentary

Chief executive officer William Bruss emphasized the company’s strong finish to 2025, highlighting the quarter as the best for pre-tax income since June 2022. He credited the performance to improvements in net interest margin, deposit growth and asset quality. Bruss noted that the company experienced net recoveries during the quarter, which supported a release from the allowance for credit losses.

The CEO also commented on the positive momentum in the Mortgage Banking segment, which returned to profitability for the third consecutive quarter. Furthermore, he noted that book value per share increased by 53 cents during the quarter to $19.03, aided by strong earnings, a share repurchase program and improved investment security valuations.

Factors Influencing the Results

Several interrelated factors contributed to the favorable quarterly results. A key driver was the reduction in funding costs, including lower interest rates on deposits and borrowings, which supported margin expansion. Simultaneously, the company benefited from increased yields on its loan portfolio, particularly in multi-family and commercial real estate mortgages.

Asset quality remained strong, with the company reporting another quarter of net recoveries. The improved credit environment allowed for a release of loan loss reserves, which further boosted earnings. The company also maintained tight control over operating expenses, especially in its community banking operations, contributing to improved efficiency metrics.

Full-Year Update

Waterstone Financial reported net income of $26.4 million in 2025, or $1.48 per share, up from $18.7 million, or $1.01 per share, in 2024, a 46.5% increase in earnings per share. Net interest income for the year rose 22.9% to $56.7 million from $46.2 million, while noninterest income totaled $85.2 million, slightly down from $89.3 million in the prior year.

Guidance

Management’s tone suggested cautious optimism heading into 2026, particularly regarding continued margin strength and stable credit conditions. The company’s capital return strategy, including dividends and share repurchases, is expected to continue, given the ongoing generation of solid earnings.

Other Developments

In the fourth quarter, Waterstone Financial returned $5.3 million to shareholders through a combination of dividends and stock buybacks. The company repurchased approximately 174,000 shares at an average price of $15.62, totaling $2.7 million. Additionally, it declared a quarterly dividend of 15 cents per share, consistent with prior quarters.