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 also has an active mortgage banking subsidiary, 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. Our deposit offerings include: certificates of deposit, money market savings accounts, transaction deposit accounts, non-interest bearing demand accounts and individual retirement accounts. Our 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, 2020 Annual Report on Form 10-K. Operating results for the three and six months ended ~~March 31,~~June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 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 loan losses, income taxes, and fair value measurements. Actual results could differ from those estimates.

Impacts of COVID-19

In March, 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which continues to spread throughout the United States and around the world. The declaration of a global pandemic indicates that almost all public commerce and related business activities must be, to varying degrees, curtailed with the goal of decreasing the rate of new infections. The ~~outbreak~~pandemic and continuing spread of COVID-19 could adversely impact a broad range of industries in which the Company’s customers operate and impair their ability to fulfill their financial obligations to the Company. ~~On March 3, 2020,~~

In 2021, restrictive measures related to the ~~Federal Open Market Committee reduced the target federal funds rate by 50 basis points~~COVID-19 pandemic continued to ~~1.00% to 1.25%. This rate was further reduced to a target range of 0% to 0.25% on March 16, 2020. These reductions in interest rates~~ease as vaccination and other ~~effects~~measures have increased. Most businesses have reopened at full capacity, which has improved commercial and consumer activity but still has not returned to pre-pandemic levels. While the overall outlook has improved based on the availability of the ~~COVID-19 outbreak may adversely affect~~vaccine to all adults and older children, there has been a recent rise in hospitalization and infection rates caused by the ~~Company’s~~Delta variant, a rapidly spreading strain of coronavirus. Therefore, the risk of further resurgence and possible reimplementation of restrictions remains.

The Company has reopened all financial ~~condition~~centers at normal business hours and ~~results of operations. As a result of the spread of the COVID-19 coronavirus, economic uncertainties~~all employees have ~~arisen which may negatively impact net interest income and noninterest income. Other financial impacts could occur though such potential impacts are unknown at this time.~~returned to work during 2021.

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 ~~March 31,~~June 30, 2021 through the issuance date of these unaudited consolidated financial statements that warranted adjustment to or disclosure in the unaudited consolidated financial statements.

Reclassifications

Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications did not result in any changes to previously reported net income. The Company reclassed certain line items in the Consolidated Statements of Cash Flows.

Impact of Recent Accounting Pronouncements

ASC Topic 326 "Financial Instruments - Credit Losses." Authoritative accounting guidance under ASC Topic 326, "Financial Instruments - Credit Losses" amended the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information for credit loss estimates. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The authoritative guidance also requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected (net of the allowance for credit losses). In addition, the credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses rather than a write-down.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law. It included an option for entities to delay the adoption of ASC Topic 326 until the earlier of the termination date of the national emergency declaration by the President or December 31, 2020. Due to the uncertainty on the economy and unemployment from COVID-19, the Company determined to delay its adoption of ASC Topic 326 and has calculated and recorded its provision for loan losses under the incurred loss model that existed prior to ASC Topic 326. On December 27, 2020, the 2021 Consolidated Appropriations Act was signed into law. The legislation extended the delay of the adoption of ASC Topic 326 allowed under the CARES Act until the earlier of the ~~termination date~~first day of the fiscal year that begins after the date when the COVID-19 national emergency ~~declaration by the President~~is terminated or January 1, 2022.

The Company has input the available historical Company data to build an internal model and is reviewing the assumptions to support the calculation under ASC Topic 326. Management’s methodology for estimating the allowance for credit losses under the current expected credit losses (CECL) model includes the use of relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience by vintage classified by loans with similar risk profiles provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are considered for differences in current loan-specific risk characteristics such as changes in underwriting standards, portfolio mix, portfolio volume, delinquency rates, interest rates, or other relevant factors. Management will continue to review and adjust these and other factors. Ongoing evaluations have been performed by vintage adjusted for prepayments. For two portfolio segments, management expects to use a weighted average remaining maturity methodology, which contemplates loss expectations on a pool basis, relying on historic loss rates.

Financial statement users should be aware that the allowance for credit loss is, by design, inherently sensitive to changes in economic outlook, loan and lease portfolio composition, portfolio duration, and other factors.

As we continue to evaluate the provisions of ASC Topic 326 as of and for the ~~three~~six months ended ~~March 31,~~June 30, 2021, we are considering the following in developing our forecast and its effect on our CECL calculations:

Duration, extent and severity of COVID-19;

Effect of government assistance; and

Unemployment and effect on economies and markets.

The Company is evaluating the guidance and its impact on the Company's statements of income and financial condition.

Note 2— Securities Available for Sale

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

	March 31, 2021									June 30, 2021
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	(In Thousands)									(In Thousands)
Mortgage-backed securities	$	23,862	$	868	$	(152	)	$	24,578	$	21,348	$	820	$	(91	)	$	22,077
Collateralized mortgage obligations:
Government sponsored enterprise issued		67,447		1,428		(460	)		68,415		83,762		1,152		(463	)		84,451
Private -label issued		3,081		49		0			3,130		2,946		41		0			2,987
Mortgage-related securities		94,390		2,345		(612	)		96,123		108,056		2,013		(554	)		109,515

Government sponsored enterprise bonds		2,500		0		(32	)		2,468		2,500		0		(18	)		2,482
Municipal securities		50,574		1,683		(16	)		52,241		47,199		1,577		(1	)		48,775
Other debt securities		12,500		24		(1,093	)		11,431		12,500		45		(1,093	)		11,452
Debt securities		65,574		1,707		(1,141	)		66,140		62,199		1,622		(1,112	)		62,709
	$	159,964	$	4,052	$	(1,753	)	$	162,263
Total										$	170,255	$	3,635	$	(1,666	)	$	172,224

	December 31, 2020									December 31, 2020
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	(In Thousands)									(In Thousands)
Mortgage-backed securities	$	24,005	$	1,110	$	(15	)	$	25,100	$	24,005	$	1,110	$	(15	)	$	25,100
Collateralized mortgage obligations:
Government sponsored enterprise issued		61,604		1,693		(13	)		63,284		61,604		1,693		(13	)		63,284
Private label issued		3,611		54		0			3,665		3,611		54		0			3,665
Mortgage-related securities		89,220		2,857		(28	)		92,049		89,220		2,857		(28	)		92,049

Government sponsered enterprise bonds		2,500		3		0			2,503		2,500		3		0			2,503
Municipal securities		51,512		2,102		0			53,614		51,512		2,102		0			53,614
Other debt securities		12,500		46		(1,093	)		11,453		12,500		46		(1,093	)		11,453
Debt securities		66,512		2,151		(1,093	)		67,570		66,512		2,151		(1,093	)		67,570
	$	155,732	$	5,008	$	(1,121	)	$	159,619
Total										$	155,732	$	5,008	$	(1,121	)	$	159,619

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 ~~March 31,~~June 30, 2021, ~~$687,000~~$590,000 of the Company’s mortgage related securities were pledged as collateral to secure mortgage banking related activities. At December 31, 2020, $785,000 of the Company's mortgage related securities were pledged as collateral to secure mortgage banking related activities and $7.2 million were pledged as collateral to secure back-to-back swaps.

The amortized cost and fair values of investment securities by contractual maturity at ~~March 31,~~June 30, 2021 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 Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)				(In Thousands)
Debt and other securities
Due within one year	$	9,390	$	9,456	$	9,523	$	9,613
Due after one year through five years		33,922		34,913		30,402		31,238
Due after five years through ten years		17,143		16,649		17,159		16,679
Due after ten years		5,119		5,122		5,115		5,179
Mortgage-related securities		94,390		96,123		108,056		109,515
	$	159,964	$	162,263
Total					$	170,255	$	172,224

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:

	March 31, 2021															June 30, 2021
	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer					Total
	Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss
	(In Thousands)															(In Thousands)
Mortgage-backed securities	$	4,308	$	(152	)	$	0	$	0		$	4,308	$	(152	)	$	4,336	$	(91	)	$	0	$	0		$	4,336	$	(91	)
Collateralized mortgage obligations:
Government sponsored enterprise issued		19,956		(460	)		0		0			19,956		(460	)		39,851		(463	)		0		0			39,851		(463	)
Government sponsored enterprise bonds		2,468		(32	)		0		0			2,468		(32	)		2,482		(18	)		0		0			2,482		(18	)
Municipal securities		3,171		(16	)		0		0			3,171		(16	)		972		(1	)		0		0			972		(1	)
Other debt securities		0		0			8,907		(1,093	)		8,907		(1,093	)		0		0			8,907		(1,093	)		8,907		(1,093	)
	$	29,903	$	(660	)	$	8,907	$	(1,093	)	$	38,810	$	(1,753	)
Total																$	47,641	$	(573	)	$	8,907	$	(1,093	)	$	56,548	$	(1,666	)

	December 31, 2020															December 31, 2020
	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer					Total
	Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss
	(In Thousands)															(In Thousands)
Mortgage-backed securities	$	2,089	$	(15	)	$	0	$	0		$	2,089	$	(15	)	$	2,089	$	(15	)	$	0	$	0		$	2,089	$	(15	)
Collateralized mortgage obligations:
Government sponsored enterprise issued		4,880		(13	)		0		0			4,880		(13	)		4,880		(13	)		0		0			4,880		(13	)
Municipal securities		0		0			0		0			0		0			0		0			0		0			0		0
Other debt securities		0		0			8,907		(1,093	)		8,907		(1,093	)		0		0			8,907		(1,093	)		8,907		(1,093	)
	$	6,969	$	(28	)	$	8,907	$	(1,093	)	$	15,876	$	(1,121	)
Total																$	6,969	$	(28	)	$	8,907	$	(1,093	)	$	15,876	$	(1,121	)

The Company reviews the investment securities portfolio on a quarterly basis to monitor its exposure to other-than-temporary impairment. In evaluating whether a security’s decline in market value is other-than-temporary, management considers the length of time and extent to which the fair value has been less than cost, the financial condition of the issuer and the underlying obligors, quality of credit enhancements, volatility of the fair value of the security, the expected recovery period of the security and ratings agency evaluations. In addition, the Company may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds and the value of any underlying collateral.

As of ~~March 31,~~June 30, 2021, the Company held 1 municipal security that had previously been deemed to be other-than-temporarily impaired. The security was issued by a tax incremental district in a municipality located in Wisconsin. During the year ended December 31, 2012, the Company received audited financial statements with respect to the municipal issuer that called into question the ability of the underlying taxing district that issued the security to operate as a going concern. During the year ended December 31, 2012, the Company's analysis of this security resulted in $77,000 in credit losses charged to earnings with respect to this municipal security. An additional $17,000 credit loss was charged to earnings during the year ended December 31, 2014 with respect to this security as a sale occurred at a discounted price. There have been no additional credit losses related to the security. As of ~~March 31,~~June 30, 2021, this security had an amortized cost of $116,000 and total life-to-date impairment of $94,000.

As of ~~March 31,~~June 30, 2021, the Company had 1 corporate debt security, included in other debt securities, which had been in an unrealized loss position for twelve months or longer. The security was determined not to be other-than-temporarily impaired as of ~~March 31,~~June 30, 2021. The Company has determined that the decline in fair value of these securities is not attributable to credit deterioration, and as the Company does not intend to sell nor is it more likely than not that it will be required to sell these securities before recovery of the amortized cost basis, this security is not considered other-than-temporarily impaired.

During the three or six months ended ~~March 31,~~June 30, 2021 and ~~March 31,~~June 30, 2020, there were 0 sales of securities.

The following table presents information relating to the Company’s internal risk ratings of its loans receivable as of ~~March 31,~~June 30, 2021 and December 31, 2020:

	One to Four- Family		Multi-Family		Home Equity		Construction and Land		Commercial Real Estate		Consumer		Commercial		Total		One to Four- Family		Multi-Family		Home Equity		Construction and Land		Commercial Real Estate		Consumer		Commercial		Total
	(In Thousands)																(In Thousands)
At March 31, 2021
At June 30, 2021
Substandard	$	6,462	$	314	$	242	$	43	$	6,964	$	0	$	1,796	$	15,821	$	5,053	$	317	$	77	$	43	$	6,919	$	0	$	1,097	$	13,506
Watch		6,164		272		83		4,269		5,585		0		3,127		19,500		8,282		269		295		4,250		6,203		0		3,694		22,993
Pass		388,544		571,579		14,348		52,811		229,241		698		42,881		1,300,102		354,709		570,060		12,356		57,579		224,298		697		40,243		1,259,942
	$	401,170	$	572,165	$	14,673	$	57,123	$	241,790	$	698	$	47,804	$	1,335,423	$	368,044	$	570,646	$	12,728	$	61,872	$	237,420	$	697	$	45,034	$	1,296,441

At December 31, 2020
Substandard	$	7,804	$	341	$	248	$	43	$	6,026	$	0	$	710	$	15,172	$	7,804	$	341	$	248	$	43	$	6,026	$	0	$	710	$	15,172
Watch		7,667		275		15		4,282		6,714		0		4,101		23,054		7,667		275		15		4,282		6,714		0		4,101		23,054
Pass		411,321		571,332		14,557		72,755		225,635		736		40,575		1,336,911		411,321		571,332		14,557		72,755		225,635		736		40,575		1,336,911
	$	426,792	$	571,948	$	14,820	$	77,080	$	238,375	$	736	$	45,386	$	1,375,137	$	426,792	$	571,948	$	14,820	$	77,080	$	238,375	$	736	$	45,386	$	1,375,137

Factors that are important to managing overall credit quality include sound loan underwriting and administration, systematic monitoring of existing loans and commitments, effective loan review on an ongoing basis, early identification of potential problems, an allowance for loan losses, and sound non-accrual and charge-off policies. Our underwriting policies require an officers' loan committee review and approval of all loans in excess of $500,000. A member of the credit department, independent of the loan originator, performs a loan review for all loans. Our ability to manage credit risk depends in large part on our ability to properly identify and manage problem loans. To do so, we maintain a loan review system under which our credit management personnel review non-owner occupied one- to four-family, multi-family, construction and land, and commercial real estate loans that individually, or as part of an overall borrower relationship exceed $1.0 million in potential exposure and review commercial loans that individually, or as part of an overall borrower relationship exceed $200,000 in potential exposure. Loans meeting these criteria are reviewed on an annual basis, or more frequently, if the loan renewal is less than one year. With respect to this review process, management has determined that pass loans include loans that exhibit acceptable financial statements, cash flow and leverage. Watch loans have potential weaknesses that deserve management's attention, and if left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credit. Substandard loans are considered inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged. These loans generally have a well-defined weakness that may jeopardize liquidation of the debt and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Finally, a loan is considered to be impaired when it is probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement. Management has determined that all non-accrual loans and loans modified under troubled debt restructurings meet the definition of an impaired loan.

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 we are 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 our 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.

Note 8 – 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%. Pursuant to Section 4012 of the CARES Act and related interim final rules, the Community Bank Leverage Ratio will be 8% beginning in the second quarter of 2020 and for the remainder of calendar year 2020, 8.5% for calendar year 2021, and 9% thereafter. 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 during the second quarter of 2020.

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 captial conservation buffer. The minimum captial conservation buffer is 2.5%.

As of ~~March 31,~~June 30, 2021, the Bank was 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.

Note 10– 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.

	March 31, 2021		December 31, 2020		June 30, 2021		December 31, 2020
	(In Thousands)				(In Thousands)
Financial instruments whose contract amounts represent potential credit risk:
Commitments to extend credit under amortizing loans (1)	$	20,302	$	23,891	$	55,571	$	23,891
Commitments to extend credit under home equity lines of credit (2)		12,767		13,653		12,992		13,653
Unused portion of construction loans (3)		65,790		74,173		57,499		74,173
Unused portion of business lines of credit		18,221		19,207		14,390		19,207
Standby letters of credit		1,246		1,296		1,241		1,296

⁽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 0 probable losses related to commitments to extend credit or the standby letters of credit as of ~~March 31,~~June 30, 2021 and December 31, 2020.

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 ~~$2.5~~$2.7 million and $2.9 million as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

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.

Note 11 – Derivative Financial Instruments

Mortgage Banking Derviatives

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 to third party investors. 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 hedge relationships. 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 815. Changes in the fair value of derivatives not designated in hedging relationships are recorded as a component of mortgage banking income in the Company’s consolidated statements of operations. The Company does not use derivatives for speculative purposes.

Forward commitments to sell mortgage loans represent commitments obtained by the Company from a secondary market agency to purchase mortgages from the Company at specified interest rates and within specified periods of time. Commitments to sell loans are made to mitigate interest rate risk on interest rate lock commitments to originate loans and loans held for sale. At ~~March 31,~~June 30, 2021, the Company had forward commitments to sell mortgage loans with an aggregate notional amount of approximately ~~$754.0~~$740.8 million and interest rate lock commitments with an aggregate notional amount of approximately ~~$518.1~~$487.0 million. The fair value of the forward commitments to sell mortgage loans at ~~March 31,~~June 30, 2021 included a gain of ~~$6.6~~$1.4 million that is reported as a component of other assets on the Company's consolidated statement of financial condition. The fair value of the interest rate locks at ~~March 31,~~June 30, 2021 included a gain of ~~$5.0~~$6.1 million that is reported as a component of other assets on the Company's consolidated statements of financial condition. At December 31, 2020, the Company had forward commitments to sell mortgage loans with an aggregate notional amount of $779.9 million and interest rate lock commitments with an aggregate notional amount of approximately $486.2 million. The fair value of the forward commitments to sell mortgage loans at December 31, 2020 included a loss of $5.1 million that is reported as a component of other liabilities on the Company's consolidated statement of financial condition. The fair value of the interest rate locks at December 31, 2020 included a gain of $11.1 million that is reported as a component of other assets on the Company's consolidated statements of financial condition.

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 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.

The aggregate amortizing notional value of back-to-back swaps with various commercial borrowers was ~~$106.9~~$106.4 million at ~~March 31,~~June 30, 2021 and $107.5 million at December 31, 2020. The Company receives fixed rates and pays floating rates based upon LIBOR on the swaps with commercial borrowers. These swaps mature in December 2029 to June ~~2037.~~2037. Commercial borrower swaps are completed independently with each borrower and are not subject to master netting arrangements. These commercial borrower swaps were reported as a component of other assets on the Company's consolidated statement of financial condition of ~~$2.8~~$1.6 million as of ~~March 31,~~June 30, 2021 and $3.9 million as of December 31, 2020. As of ~~March 31,~~June 30, 2021 and December 31, 2020, 0 back-to-back swaps were in default.

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 2021 and 2020.

	Three months ended March 31,					Six months ended June 30,
	2021		2020			2021		2020
	(In Thousands)					(In Thousands)

Mortgage derivative, net balance at the beginning of the period	$	5,917	$	1835		$	5,917	$	1,835
Mortgage derivative gain, net		5,684		(3,282	)		1,572		6,794
Mortgage derivative, net balance at the end of the period	$	11,601	$	(1,447	)	$	7,489	$	8,629

There were no0 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 our assets recorded in our consolidated statements of financial condition at their fair value on a non-recurring basis as of ~~March 31,~~June 30, 2021 and December 31, 2020, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value.

			Fair Value Measurements Using								Fair Value Measurements Using
	March 31, 2021		Level 1		Level 2		Level 3		June 30, 2021		Level 1		Level 2		Level 3
	(In Thousands)								(In Thousands)
Impaired loans, net (1)	$	185	$	0	$	0	$	185
Real estate owned		150		0		0		150	$	150	$	0	$	0	$	150
Impaired mortgage servicing rights		189		0		0		189		8		0		0		8

			Fair Value Measurements Using
	December 31, 2020		Level 1		Level 2		Level 3
	(In Thousands)
Impaired loans, net (1)	$	185	$	0	$	0	$	185
Real estate owned		322		0		0		322
Impaired mortgage servicing rights		189		0		0		189

(1) Represents collateral-dependent impaired loans, net, which are included in loans.

Loans – We do not record loans at fair value on a recurring basis. On a non-recurring basis, loans determined to be impaired are analyzed to determine whether a collateral shortfall exists, and if such a shortfall exists, are recorded on our consolidated statements of financial condition at net realizable value of the underlying collateral. Fair value is determined based on third party appraisals. 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 impaired loans, loans that have been deemed to be impaired are considered to be Level 3 in the fair value hierarchy of valuation techniques. At ~~March 31,~~June 30, 2021, ~~loans determined to be~~there were 0 impaired ~~with an outstanding balance of $206,000 were carried net of specific reserves of $21,000 for a fair value of $185,000.~~loans. At December 31, 2020, loans determined to be impaired with an outstanding balance of $208,000 were carried net of specific reserves of $23,000 for a fair value of $185,000. Impaired loans collateralized by assets which are valued in excess of the net investment in the loan do not require any specific reserves.

Real estate owned – On a non-recurring basis, real estate owned is recorded in our 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. There were 0 writedowns during the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively. At ~~March 31,~~June 30, 2021 and December 31, 2020, real estate owned totaled $150,000 and $322,000, respectively.

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. At ~~March 31,~~June 30, 2021 and December 31, 2020, there were $27,000 and $77,000, respectively, of impairment on mortgage servicing rights.

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of ~~March 31,~~June 30, 2021, the significant unobservable inputs used in the fair value measurements were as follows:

					Significant Unobservable Input Value													Significant Unobservable Input Value
	Fair Value at March 31, 2021		Valuation Technique	Significant Unobservable Inputs	Minimum Value			Maximum Value			Weighted Average			Fair Value at June 30, 2021		Valuation Technique	Significant Unobservable Inputs	Minimum Value			Maximum Value			Weighted Average

Mortgage banking derivatives, net	$	11,601	Pricing models	Pull through rate		18.0	%		99.8	%		91.4	%	$	7,489	Pricing models	Pull through rate		10.4	%		99.8	%		90.7	%
Impaired loans		206	Market approach	Discount rates applied to appraisals		15.0	%		15.0	%		15.0	%
Real estate owned		150	Market approach	Discount rates applied to appraisals		34.8	%		34.8	%		34.8	%		150	Market approach	Discount rates applied to appraisals		34.8	%		34.8	%		34.8	%
Mortgage servicing rights		12,972	Pricing models	Prepayment rate		8.1	%		33.7	%		9.2	%
Impaired mortgage servicing rights															8	Pricing models	Prepayment rate		15.6	%		34.6	%		25.9	%
				Discount rate		8.1	%		12.0	%		9.6	%				Discount rate		8.6	%		12.5	%		10.3	%
				Cost to service	$	77.01		$	839.34		$	82.92					Cost to service	$	88.46		$	839.29		$	361.60

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.

Loans Held for Sale

Fair value is estimated using the prices of the Company’s existing commitments to sell such loans and/or the quoted market price for commitments to sell similar loans.

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 market place. 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 ~~March 31,~~June 30, 2021 and December 31, 2020.

Mortgage Banking Derivative Assets and Liabilities

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 relies on 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 relies on 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. On the Company’s consolidated statements of financial condition, instruments that have a positive fair value are included in prepaid expenses and other assets, and those instruments that have a negative fair value are included in other liabilities.

Interest Rate Swap Assets and Liabilities

The carrying value and fair value of existing derivative financial instruments are based upon independent valuation models, which use widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative contract. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities.

Maryland	90-1026709
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

11200 W. Plank Court Wauwatosa, Wisconsin	53226
(Address of principal executive offices)	(Zip Code)

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.01 Par Value		WSBF		The NASDAQ Stock Market LLC

Large accelerated filer ☐	Accelerated filer ☒	Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐

	Page No.

PART I. FINANCIAL INFORMATION

Item l. Financial Statements
Consolidated Statements of Financial Condition as of ~~March 31,~~June 30, 2021 (unaudited) and December 31, 2020	3
Consolidated Statements of Income for the three and ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020 (unaudited)	4
Consolidated Statements of Comprehensive Income for the three and ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020 (unaudited)	5
Consolidated Statements of Changes in Shareholders’ Equity for the three and ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020 (unaudited)	66-7
Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020 (unaudited)	78
Notes to Consolidated Financial Statements (unaudited)	~~8-36~~9-37

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~37-55~~38-62
I~~tem~~Item 3. Quantitative and Qualitative Disclosures about Market Risk	5663
Item 4. Controls and Procedures	5764

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	5764
Item 1A. Risk Factors Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information	5764 5764 5764 5764 5865
Item 6. Exhibits	5865
Signatures	5865

	(Unaudited)						(Unaudited)
	March 31, 2021			December 31, 2020			June 30, 2021			December 31, 2020
Assets	(Dollars In Thousands, except share and per share data)						(Dollars In Thousands, except share and per share data)
Cash	$	160,144		$	56,190		$	197,981		$	56,190
Federal funds sold		19,029			18,847			11,531			18,847
Interest-earning deposits in other financial institutions and other short term investments		19,228			19,730			19,227			19,730
Cash and cash equivalents		198,401			94,767			228,739			94,767
Securities available for sale (at fair value)		162,263			159,619			172,224			159,619
Loans held for sale (at fair value)		341,293			402,003			352,627			402,003
Loans receivable		1,335,423			1,375,137			1,296,441			1,375,137
Less: Allowance for loan losses		17,780			18,823			17,410			18,823
Loans receivable, net		1,317,643			1,356,314			1,279,031			1,356,314

Office properties and equipment, net		23,402			23,722			23,186			23,722
Federal Home Loan Bank stock (at cost)		26,720			26,720			26,538			26,720
Cash surrender value of life insurance		63,874			63,573			64,738			63,573
Real estate owned, net		150			322			150			322
Prepaid expenses and other assets		64,265			57,547			54,720			57,547
Total assets	$	2,198,011		$	2,184,587		$	2,201,953		$	2,184,587

Liabilities and Shareholders’ Equity
Liabilities:
Demand deposits	$	194,978		$	188,225		$	208,523		$	188,225
Money market and savings deposits		318,959			295,317			351,394			295,317
Time deposits		705,754			701,328			671,143			701,328
Total deposits		1,219,691			1,184,870			1,231,060			1,184,870

Borrowings		490,505			508,074			475,000			508,074
Advance payments by borrowers for taxes		12,048			3,522			17,657			3,522
Other liabilities		45,086			75,003			46,498			75,003
Total liabilities		1,767,330			1,771,469			1,770,215			1,771,469

Shareholders’ equity:
Preferred stock (par value $0.01 per share)
Authorized - 50,000,000 shares at March 31, 2021 and at December 31, 2020, 0 shares issued		0			0
Common stock (par value $0.01 per share)
Authorized - 100,000,000 shares at March 31, 2021 and at December 31, 2020
Issued - 25,230,284 at March 31, 2021 and 25,087,976 at December 31, 2020
Outstanding - 25,230,284 at March 31, 2021 and 25,087,976 at December 31, 2020		252			251
Preferred stock (par value $0.01 per share)
Authorized - 50,000,000 shares at June 30, 2021 and at December 31, 2020, 0 shares issued								0			0
Common stock (par value $0.01 per share)
Authorized - 100,000,000 shares at June 30, 2021 and at December 31, 2020
Issued - 25,213,161 at June 30, 2021 and 25,087,976 at December 31, 2020
Outstanding - 25,213,161 at June 30, 2021 and 25,087,976 at December 31, 2020								252			251
Additional paid-in capital		182,533			180,684			182,346			180,684
Retained earnings		261,859			245,287			263,048			245,287
Unearned ESOP shares		(15,133	)		(15,430	)		(14,837	)		(15,430	)
Accumulated other comprehensive income, net of taxes		1,170			2,326			929			2,326
Total shareholders’ equity		430,681			413,118			431,738			413,118
Total liabilities and shareholders’ equity	$	2,198,011		$	2,184,587		$	2,201,953		$	2,184,587

	Three months ended March 31,					Three months ended June 30,					Six months ended June 30,
	2021			2020		2021			2020		2021			2020
	(In Thousands, except per share amounts)					(In Thousands, except per share amounts)

Interest income:
Loans	$	16,603		$	17,687	$	16,480		$	18,493	$	33,083		$	36,180
Mortgage-related securities		491			702		486			670		977			1,372
Debt securities, federal funds sold and short-term investments		875			1,063		858			698		1,733			1,761
Total interest income		17,969			19,452		17,824			19,861		35,793			39,313
Interest expense:
Deposits		1,517			4,318		1,078			3,947		2,595			8,265
Borrowings		2,500			2,608		2,469			2,665		4,969			5,273
Total interest expense		4,017			6,926		3,547			6,612		7,564			13,538
Net interest income		13,952			12,526		14,277			13,249		28,229			25,775
Provision (credit) for loan losses		(1,070	)		785		(750	)		4,500		(1,820	)		5,285
Net interest income after provision (credit) for loan losses		15,022			11,741
Net interest income after provision for loan losses							15,027			8,749		30,049			20,490
Noninterest income:
Service charges on loans and deposits		690			481		657			2,231		1,347			2,712
Increase in cash surrender value of life insurance		301			353		684			520		985			873
Mortgage banking income		54,391			30,406		49,649			63,774		104,040			94,180
Other		817			224		1,054			379		1,871			603
Total noninterest income		56,199			31,464		52,044			66,904		108,243			98,368
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		34,123			24,401		33,926			36,889		68,049			61,290
Occupancy, office furniture, and equipment		2,565			2,741		2,293			2,534		4,858			5,275
Advertising		824			900		911			864		1,735			1,764
Data processing		971			1,006		914			1,095		1,885			2,101
Communications		331			338		326			317		657			655
Professional fees		(315	)		1,832		569			1,077		254			2,909
Real estate owned		(12	)		11		0			33		(12	)		44
Loan processing expense		1,335			1,076		1,200			1,208		2,535			2,284
Other		3,178			2,903		3,158			3,672		6,336			6,575
Total noninterest expenses		43,000			35,208		43,297			47,689		86,297			82,897
Income before income taxes		28,221			7,997		23,774			27,964		51,995			35,961
Income tax expense		6,877			1,928		5,880			7,016		12,757			8,944
Net income	$	21,344		$	6,069	$	17,894		$	20,948	$	39,238		$	27,017
Income per share:
Basic	$	0.90		$	0.24	$	0.75		$	0.86	$	1.65		$	1.08
Diluted	$	0.89		$	0.24	$	0.74		$	0.85	$	1.64		$	1.08
Weighted average shares outstanding:
Basic		23,735			25,405		23,848			24,464		23,792			24,934
Diluted		23,950			25,612		24,029			24,513		23,996			25,071

	Common Stock						Additional Paid-In Capital			Retained Earnings			Unearned ESOP Shares			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity			Common Stock						Additional Paid-In Capital			Retained Earnings			Unearned ESOP Shares			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity
	Shares			Amount																		Shares			Amount
For the three months ended March 31, 2020	(In Thousands, except per share amounts)
For the six months ended June 30, 2020																						(In Thousands, except per share amounts)
Balances at December 31, 2019		27,148		$	271		$	211,997		$	197,393		$	(16,617	)	$	642		$	393,686			27,148		$	271		$	211,997		$	197,393		$	(16,617	)	$	642		$	393,686

Comprehensive income:
Net income		-			0			0			6,069			0			0			6,069			-			0			0			27,017			0			0			27,017
Other comprehensive income		-			0			0			0			0			850			850			-			0			0			0			0			2,117			2,117
Total comprehensive income																				6,919																					29,134

ESOP shares committed to be released to Plan participants		-			0			152			0			297			0			449			-			0			228			0			594			0			822
Cash dividend declared, $0.62 per share		-			0			0			(15,650	)		0			0			(15,650	)
Cash dividend declared, $0.74 per share																							-			0			0			(18,547	)		0			0			(18,547	)
Proceeds from stock option exercises		39			1			452			0			0			0			453			45			1			530			0			0			0			531
Stock compensation expense		-			0			214			0			0			0			214			-			0			389			0			0			0			389
Purchase of common stock returned to authorized but unissued		(912	)		(9	)		(14,236	)		0			0			0			(14,245	)		(1,350	)		(14	)		(20,382	)		0			0			0			(20,396	)
Balances at March 31, 2020		26,275		$	263		$	198,579		$	187,812		$	(16,320	)	$	1,492		$	371,826
Balances at June 30, 2020																							25,843		$	258		$	192,762		$	205,863		$	(16,023	)	$	2,759		$	385,619

For the three months ended March 31, 2021	(In Thousands, except per share amounts)
For the six months ended June 30, 2021																						(In Thousands, except per share amounts)
Balances at December 31, 2020		25,088		$	251		$	180,684		$	245,287		$	(15,430	)	$	2,326		$	413,118			25,088		$	251		$	180,684		$	245,287		$	(15,430	)	$	2,326		$	413,118

Comprehensive income:
Net income		-			0			0			21,344			0			0			21,344			-			0			0			39,238			0			0			39,238
Other comprehensive loss		-			0			0			0			0			(1,156	)		(1,156	)		-			0			0			0			0			(1,397	)		(1,397	)
Total comprehensive income																				20,188																					37,841

ESOP shares committed to be released to Plan participants		-			0			223			0			297			0			520			-			0			455			0			593			0			1,048
Cash dividend declared, $0.20 per share		-			0			0			(4,772	)		0			0			(4,772	)
Cash dividend declared, $0.90 per share																							-			0			0			(21,477	)		0			0			(21,477	)
Proceeds from stock option exercises		142			1			1,458			0			0			0			1,459			184			2			1,992			0			0			0			1,994
Stock compensation expense		-			0			175			0			0			0			175			-			0			370			0			0			0			370
Purchase of common stock returned to authorized but unissued		0			0			(7	)		0			0			0			(7	)		(59	)		(1	)		(1,155	)		0			0			0			(1,156	)
Balances at March 31, 2021		25,230		$	252		$	182,533		$	261,859		$	(15,133	)	$	1,170		$	430,681
Balances at June 30, 2021																							25,213		$	252		$	182,346		$	263,048		$	(14,837	)	$	929		$	431,738

	As of March 31, 2021													As of June 30, 2021
	1-59 Days Past Due⁽¹⁾			60-89 Days Past Due⁽²⁾		90 Days or Greater		Total Past Due		Current⁽³⁾		Total Loans		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)													(In Thousands)
Mortgage loans:
Residential real estate:
One- to four-family		$	4,170	$	0	$	2,159	$	6,329	$	394,841	$	401,170		$	2,999	$	498	$	2,767	$	6,264	$	361,780	$	368,044
Multi-family			0		0		314		314		571,851		572,165			0		0		317		317		570,329		570,646
Home equity			36		0		30		66		14,607		14,673			19		213		29		261		12,467		12,728
Construction and land			0		0		43		43		57,080		57,123			0		0		43		43		61,829		61,872
Commercial real estate			0		0		30		30		241,760		241,790			0		0		19		19		237,401		237,420
Consumer			0		0		0		0		698		698			0		0		0		0		697		697
Commercial loans			140		0		0		140		47,664		47,804			0		0		0		0		45,034		45,034
Total		$	4,346	$	0	$	2,576	$	6,922	$	1,328,501	$	1,335,423		$	3,018	$	711	$	3,175	$	6,904	$	1,289,537	$	1,296,441

	As of December 31, 2020
	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		$	3,796	$	142	$	3,530	$	7,468	$	419,324	$	426,792
Multi-family			0		0		314		314		571,634		571,948
Home equity			0		0		30		30		14,790		14,820
Construction and land			0		0		43		43		77,037		77,080
Commercial real estate			0		0		41		41		238,334		238,375
Consumer			0		0		0		0		736		736
Commercial loans			0		0		0		0		45,386		45,386
Total		$	3,796	$	142	$	3,958	$	7,896	$	1,367,241	$	1,375,137

	One- to Four- Family			Multi-Family		Home Equity			Construction and Land			Commercial Real Estate			Consumer			Commercial		Total				One- to Four- Family			Multi-Family		Home Equity			Construction and Land			Commercial Real Estate		Consumer			Commercial		Total
	(In Thousands)																							(In Thousands)
Three months ended March 31, 2021
Six months ended June 30, 2021																							Six months ended June 30, 2021
Balance at beginning of period	$	5,459		$	5,600	$	194		$	1,755		$	5,138		$	35		$	642	$	18,823			$	5,459		$	5,600	$	194		$	1,755		$	5,138	$	35		$	642	$	18,823
Provision (credit) for loan losses		(862	)		421		(15	)		(505	)		(123	)		(2	)		16		(1,070	)			(1,745	)		393		(46	)		(487	)		44		(1	)		22		(1,820	)
Charge-offs		(14	)		0		0			0			0			0			0		(14	)			(39	)		0		0			0			0		0			0		(39	)
Recoveries		11			23		4			1			2			0			0		41				350			35		8			51			2		0			-		446
Balance at end of period	$	4,594		$	6,044	$	183		$	1,251		$	5,017		$	33		$	658	$	17,780			$	4,025		$	6,028	$	156		$	1,319		$	5,184	$	34		$	664	$	17,410

Three months ended March 31, 2020
Six months ended June 30, 2020																				Six months ended June 30, 2020
Balance at beginning of period	$	4,907		$	4,138	$	201	$	610	$	2,145	$	14		$	372	$	12,387			$	4,907		$	4,138		$	201		$	610	$	2,145	$	14		$	372		$	12,387
Provision (credit) for loan losses		(234	)		160		32		76		654		10			87		785				754			1,728			12			542		1,972		25			252			5,285
Charge-offs		(6	)		0		0		0		0		(1	)		0		(7	)			(7	)		(5	)		(13	)		0		0		(1	)		(8	)		(34	)
Recoveries		47			3		6		1		4		0			0		61				61			9			18			1		7		0			0			96
Balance at end of period	$	4,714		$	4,301	$	239	$	687	$	2,803	$	23		$	459	$	13,226			$	5,715		$	5,870		$	218		$	1,153	$	4,124	$	38		$	616		$	17,734

Three months ended June 30, 2020
Balance at beginning of period	$	4,714		$	4,301		$	239		$	687	$	2,803	$	23	$	459		$	13,226
Provision for loan losses		988			1,568			(20	)		466		1,318		15		165			4,500
Charge-offs		(1	)		(5	)		(13	)		0		0		0		(8	)		(27	)
Recoveries		14			6			12			0		3		0		0			35
Balance at end of period	$	5,715		$	5,870		$	218		$	1,153	$	4,124	$	38	$	616		$	17,734

	One- to Four- Family		Multi- Family		Home Equity		Construction and Land		Commercial Real Estate		Consumer		Commercial		Total		One- to Four- Family		Multi- Family		Home Equity		Construction and Land		Commercial Real Estate		Consumer		Commercial		Total
	(In Thousands)																(In Thousands)
Allowance related to loans individually evaluated for impairment	$	21	$	0	$	0	$	0	$	0	$	0	$	0	$	21	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Allowance related to loans collectively evaluated for impairment		4,573		6,044		183		1,251		5,017		33		658		17,759		4,025		6,028		156		1,319		5,184		34		664		17,410
Balance at end of period	$	4,594	$	6,044	$	183	$	1,251	$	5,017	$	33	$	658	$	17,780	$	4,025	$	6,028	$	156	$	1,319	$	5,184	$	34	$	664	$	17,410

Loans individually evaluated for impairment	$	6,462	$	314	$	59	$	43	$	6,964	$	0	$	1,097	$	14,939	$	5,053	$	317	$	77	$	43	$	1,242	$	0	$	1,097	$	7,829
Loans collectively evaluated for impairment		394,708		571,851		14,614		57,080		234,826		698		46,707		1,320,484		362,991		570,329		12,651		61,829		236,178		697		43,937		1,288,612
Total gross loans	$	401,170	$	572,165	$	14,673	$	57,123	$	241,790	$	698	$	47,804	$	1,335,423	$	368,044	$	570,646	$	12,728	$	61,872	$	237,420	$	697	$	45,034	$	1,296,441

	One- to Four-Family		Multi- Family		Home Equity		Construction and Land		Commercial Real Estate		Consumer		Commercial		Total
	(In Thousands)
Allowance related to loans individually evaluated for impairment	$	23	$	0	$	0	$	0	$	0	$	0	$	0	$	23
Allowance related to loans collectively evaluated for impairment		5,436		5,600		194		1,755		5,138		35		642		18,800
Balance at end of period	$	5,459	$	5,600	$	194	$	1,755	$	5,138	$	35	$	642	$	18,823

Loans individually evaluated for impairment	$	7,805	$	341	$	63	$	43	$	7,248	$	0	$	1,097	$	16,597
Loans collectively evaluated for impairment		418,987		571,607		14,757		77,037		231,127		736		44,289		1,358,540
Total gross loans	$	426,792	$	571,948	$	14,820	$	77,080	$	238,375	$	736	$	45,386	$	1,375,137

	As of March 31, 2021								As of June 30, 2021
	Recorded Investment		Unpaid Principal		Reserve		Cumulative Charge-Offs		Recorded Investment		Unpaid Principal		Reserve		Cumulative Charge-Offs
	(In Thousands)								(In Thousands)
Total Impaired with Reserve
One- to four-family	$	206	$	206	$	21	$	0	$	0	$	0	$	0	$	0
Multi-family		0		0		0		0		0		0		0		0
Home equity		0		0		0		0		0		0		0		0
Construction and land		0		0		0		0		0		0		0		0
Commercial real estate		0		0		0		0		0		0		0		0
Consumer		0		0		0		0		0		0		0		0
Commercial		0		0		0		0		0		0		0		0
		206		206		21		0		0		0		0		0
Total Impaired with no Reserve
One- to four-family		6,256		7,019		0		763		5,053		5,496		0		443
Multi-family		314		314		0		0		317		317		0		0
Home equity		59		59		0		0		77		77		0		0
Construction and land		43		51		0		8		43		51		0		8
Commercial real estate		6,964		6,964		0		0		1,242		1,242		0		0
Consumer		0		0		0		0		0		0		0		0
Commercial		1,097		1,097		0		0		1,097		1,097		0		0
		14,733		15,504		0		771		7,829		8,280		0		451
Total Impaired
One- to four-family		6,462		7,225		21		763		5,053		5,496		0		443
Multi-family		314		314		0		0		317		317		0		0
Home equity		59		59		0		0		77		77		0		0
Construction and land		43		51		0		8		43		51		0		8
Commercial real estate		6,964		6,964		0		0		1,242		1,242		0		0
Consumer		0		0		0		0		0		0		0		0
Commercial		1,097		1,097		0		0		1,097		1,097		0		0
	$	14,939	$	15,710	$	21	$	771	$	7,829	$	8,280	$	0	$	451

	(In Thousands)		(In Thousands)
Estimate for the period ended December 31:
2021	$	1,132	$	780
2022		1,400		1,539
2023		1,216		1,261
2024		1,108		1,161
2025				1,029
Thereafter		3,974		3,473
Total		8,830	$	9,243

		As of March 31, 2021															As of June 30, 2021
		Accruing				Non-accruing					Total						Accruing				Non-accruing					Total
		Amount		Number		Amount			Number		Amount			Number			Amount		Number		Amount			Number		Amount			Number
	(Dollars in Thousands)															(Dollars in Thousands)

One- to four-family		$	2,728		2		$	1,088		4		$	3,816		6		$	1,158		1		$	942		3		$	2,100		4
Commercial real estate			6,934		2			0		0			6,934		2			1,223		1			0		0			1,223		1
Commercial			1,097		1			0		0			1,097		1			1,097		1			0		0			1,097		1
		$	10,759		5		$	1,088		4		$	11,847		9		$	3,478		3		$	942		3		$	4,420		6

		As of March 31, 2021													As of June 30, 2021
	Performing in accordance with modified terms					In Default				Total				Performing in accordance with modified terms					In Default				Total
	Amount			Number		Amount		Number		Amount		Number		Amount			Number		Amount		Number		Amount		Number
	(Dollars in Thousands)													(Dollars in Thousands)
Interest reduction and principal forbearance		$	3,206		4	$	0		0	$	3,206		4		$	1,499		2	$	0		0	$	1,499		2
Interest reduction			27		1		0		0		27		1			26		1		0		0		26		1
Principal forbearance			8,614		4		0		0		8,614		4			2,895		3		0		0		2,895		3
		$	11,847		9	$	0		0	$	11,847		9		$	4,420		6	$	0		0	$	4,420		6

	(In Thousands)

Within one year	$	594,237
More than one to two years		99,840
More than two to three years		9,718
More than three to four years		886
More than four through five years		1,073
	$	705,754

	(In Thousands)

Within one year	$	564,231
More than one to two years		100,374
More than two to three years		4,472
More than three to four years		1,146
More than four through five years		920
	$	671,143

		March 31, 2021																					June 30, 2021
		Actual					For Capital Adequacy Purposes					Minimum Capital Adequacy with Capital Buffer					To Be Well Capitalized Under Prompt Corrective Action Provisions						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				Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
		(Dollars In Thousands)																					(Dollars In Thousands)
Total Capital (to risk-weighted assets)	Total Capital (to risk-weighted assets)																					Total Capital (to risk-weighted assets)
Consolidated Waterstone Financial, Inc.		$	446,657		27.07	%	$	131,977		8.00	%	$	173,220		10.50	%	$	N/A		N/A			$	447,596		28.04	%	$	127,690		8.00	%	$	167,593		10.50	%	$	N/A		N/A
WaterStone Bank			396,096		24.01	%		131,977		8.00	%		173,220		10.50	%		164,971		10.00	%			403,174		25.29	%		127,528		8.00	%		167,380		10.50	%		159,410		10.00	%
Tier 1 Capital (to risk-weighted assets)	Tier 1 Capital (to risk-weighted assets)																					Tier 1 Capital (to risk-weighted assets)
Consolidated Waterstone Financial, Inc.			428,877		26.00	%		98,983		6.00	%		140,226		8.50	%		N/A		N/A				430,186		26.95	%		95,767		6.00	%		135,670		8.50	%		N/A		N/A
WaterStone Bank			378,316		22.93	%		98,983		6.00	%		140,226		8.50	%		131,977		8.00	%			385,764		24.20	%		95,646		6.00	%		135,498		8.50	%		127,528		8.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)	Common Equity Tier 1 Capital (to risk-weighted assets)																					Common Equity Tier 1 Capital (to risk-weighted assets)
Consolidated Waterstone Financial, Inc.			428,877		26.00	%		74,237		4.50	%		115,480		7.00	%		N/A		N/A				430,186		26.95	%		71,825		4.50	%		111,729		7.00	%		N/A		N/A
WaterStone Bank			378,316		22.93	%		74,237		4.50	%		115,480		7.00	%		107,231		6.50	%			385,764		24.20	%		71,734		4.50	%		111,587		7.00	%		103,616		6.50	%
Tier 1 Capital (to average assets)	Tier 1 Capital (to average assets)																					Tier 1 Capital (to average assets)
Consolidated Waterstone Financial, Inc.			428,877		19.77	%		86,752		4.00	%		N/A		N/A			N/A		N/A				430,186		19.50	%		88,240		4.00	%		N/A		N/A			N/A		N/A
WaterStone Bank			378,316		17.44	%		86,752		4.00	%		N/A		N/A			108,440		5.00	%			385,764		17.49	%		88,240		4.00	%		N/A		N/A			110,300		5.00	%
State of Wisconsin (to total assets)	State of Wisconsin (to total assets)																					State of Wisconsin (to total assets)
WaterStone Bank			378,316		17.24	%		131,644		6.00	%		N/A		N/A			N/A		N/A				385,764		17.56	%		131,817		6.00	%		N/A		N/A			N/A		N/A

	As of or for the three months ended March 31, 2021												As of or for the three months ended June 30, 2021
	Community Banking			Mortgage Banking			Holding Company and Other			Consolidated			Community Banking			Mortgage Banking			Holding Company and Other			Consolidated
	(In Thousands)												(In Thousands)

Net interest income	$	14,247			(350	)		55			13,952
Net interest income (expense)													$	14,517		$	(251	)	$	11		$	14,277
Provision (credit) for loan losses		(1,100	)		30			0			(1,070	)		(750	)		0			0			(750	)
Net interest income after provision (credit) for loan losses		15,347			(380	)		55			15,022
Net interest income (expense) after provision for loan losses														15,267			(251	)		11			15,027

Noninterest income		1,243			55,035			(79	)		56,199			1,630			50,556			(142	)		52,044

Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		4,975			29,262			(114	)		34,123			4,874			29,170			(118	)		33,926
Occupancy, office furniture and equipment		1,025			1,540			0			2,565			887			1,406			0			2,293
Advertising		209			615			0			824			260			651			0			911
Data processing		511			454			6			971			466			443			5			914
Communications		119			212			0			331			86			240			0			326
Professional fees		194			(524	)		15			(315	)		198			361			10			569
Real estate owned		(12	)		0			0			(12	)		0			0			0			0
Loan processing expense		0			1,335			0			1,335			0			1,200			0			1,200
Other		440			2,681			57			3,178			461			2,678			19			3,158
Total noninterest expenses		7,461			35,575			(36	)		43,000			7,232			36,149			(84	)		43,297
Income before income taxes		9,129			19,080			12			28,221			9,665			14,156			(47	)		23,774
Income tax expense (benefit)		1,786			5,096			(5	)		6,877
Income tax expense														2,128			3,761			(9	)		5,880
Net income	$	7,343			13,984			17			21,344		$	7,537		$	10,395		$	(38	)	$	17,894

Total assets	$	2,132,366			411,750			(346,105	)		2,198,011		$	2,135,895		$	406,534		$	(340,476	)	$	2,201,953

	As of or for the three months ended March 31, 2020										As of or for the six months ended June 30, 2021
	Community Banking		Mortgage Banking			Holding Company and Other			Consolidated		Community Banking			Mortgage Banking			Holding Company and Other			Consolidated
	(In Thousands)										(In Thousands)

Net interest income	$	12,908		(379	)		(3	)		12,526
Provision for loan losses		750		35			0			785
Net interest income after provision for loan losses		12,158		(414	)		(3	)		11,741
Net interest income (expense)											$	28,764		$	(601	)	$	66		$	28,229
Provision (credit) for loan losses												(1,850	)		30			0			(1,820	)
Net interest income (expense) after provision for loan losses												30,614			(631	)		66			30,049

Noninterest income		1,028		30,798			(362	)		31,464		2,873			105,591			(221	)		108,243

Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		5,168		19,387			(154	)		24,401		9,849			58,432			(232	)		68,049
Occupancy, office furniture and equipment		1,014		1,727			0			2,741		1,912			2,946			0			4,858
Advertising		248		652			0			900		469			1,266			0			1,735
Data processing		605		395			6			1,006		977			897			11			1,885
Communications		97		241			0			338		205			452			0			657
Professional fees		198		1,620			14			1,832		392			(163	)		25			254
Real estate owned		11		0			0			11		(12	)		0			0			(12	)
Loan processing expense		0		1,076			0			1,076		0			2,535			0			2,535
Other		580		2,552			(229	)		2,903		901			5,359			76			6,336
Total noninterest expenses		7,921		27,650			(363	)		35,208		14,693			71,724			(120	)		86,297
Income (loss) before income taxes		5,265		2,734			(2	)		7,997
Income before income taxes												18,794			33,236			(35	)		51,995
Income tax expense		1,154		768			6			1,928		3,914			8,857			(14	)		12,757
Net income (loss)	$	4,111		1,966			(8	)		6,069

Total assets	$	2,018,092		311,570			(272,986	)		2,056,676
Net income											$	14,880		$	24,379		$	(21	)	$	39,238

Maturity analysis	Operating leases			Operating leases
	(In Thousands)			(In Thousands)
One year or less	$	2,742		$	2,532
More than one year through two years		2,128			1,966
More than two years through three years		1,484			1,390
More than three years through four years		804			647
More than four years through five years		452			327
More than five years		874			756
Total lease payments		8,484			7,618
Present value discount		(952	)		(880	)
Lease liability	$	7,532		$	6,738

●		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.

●		general economic conditions, either nationally or in our market area, including employment prospects, that are different than expected;
●		the effect of any pandemic; including COVID-19;
●		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;
●		the inability of third-party providers to perform their obligations to us;
●		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 ability of the U.S. Government to manage federal debt limits;
●		significant increases in our loan losses; and
●		changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

	Three months ended March 31,									Three months ended June 30,
	2021 versus 2020									2021 versus 2020
	Increase (Decrease) due to									Increase (Decrease) due to
	Volume			Rate			Net			Volume			Rate			Net
	(In Thousands)									(In Thousands)
Interest income:
Loans receivable and held for sale (1)(2)	$	1,412		$	(2,496	)	$	(1,084	)	$	(1,047	)	$	(966	)	$	(2,013	)
Mortgage related securities (3)		(127	)		(84	)		(211	)		(34	)		(150	)		(184	)
Debt securities, federal funds sold and short-term investments (3)(4)		1,523			(1,709	)		(186	)		509			(333	)		176
Total interest-earning assets		2,808			(4,289	)		(1,481	)		(572	)		(1,449	)		(2,021	)

Interest expense:
Demand accounts		3			(1	)		2			3			-			3
Money market, savings, and escrow accounts		511			(691	)		(180	)		342			(601	)		(259	)
Time deposits		(145	)		(2,478	)		(2,623	)		(182	)		(2,431	)		(2,613	)
Total interest-earning deposits		369			(3,170	)		(2,801	)		163			(3,032	)		(2,869	)
Borrowings		(79	)		(29	)		(108	)		(621	)		425			(196	)
Total interest-bearing liabilities		290			(3,199	)		(2,909	)		(458	)		(2,607	)		(3,065	)
Net change in net interest income	$	2,518		$	(1,090	)	$	1,428		$	(114	)	$	1,158		$	1,044

●		Interest income on loans decreased ~~$1.1~~$2.0 million due primarily to a 4924 basis point decrease in average yield on loans as London Interbank Offered Rate ~~(LIBOR)~~("LIBOR") and U.S. Treasury rates continued to decrease ~~partially offset by an increase of $95.2~~and a $104.9 million, or ~~6.1%~~6.0%, decrease in average ~~loans.~~loans as payoffs continue to outpace originations. The ~~increase~~decrease in average loan balance was driven by ~~an increase~~a decrease of ~~$141.6~~$101.6 million, or ~~84.0%~~7.2%, in the average balance of loans held ~~for sale partially offset by~~in portfolio along with a ~~$46.5~~$3.3 million, or ~~3.3%~~1.0%, decrease in the average balance of loans held ~~in portfolio.~~for sale.
●		Interest income from mortgage-related securities decreased ~~$211,000~~$184,000 as the yield decreased 3260 basis points and the average balance decreased ~~$21.6~~$5.7 million.
●		Interest income from other interest-earning assets (comprised of debt securities, federal funds sold and short-term investments) ~~decreased $188,000~~increased $160,000 due primarily to a ~~77 basis point decrease~~$143.8 million increase in the average ~~yield. The decrease in average yield was primarily due to higher yielding securities maturing. The average~~ balance ~~increased $67.4 million to $273.9 million due to higher~~as cash balances ~~offset by lower municipal securities balances.~~were greater. The increase in average cash balances resulted fron the growth in deposits ~~outpacing loan growth.~~along with paydowns on loans. Offsetting the increase in average balance, the yield decreased 59 basis points as higher rate securities matured and were placed in cash.
●		Interest expense on time deposits decreased $2.6 million, or ~~67.6%~~75.2%, primarily due to a 141 basis point decrease in average cost of time deposits. Additionally, the average balance of time deposits decreased ~~$28.4~~$40.4 million compared to the prior year period.
●		Interest expense on money market, savings, and escrow accounts decreased ~~$180,000,~~$259,000, or ~~42.2%~~55.8%, due primarily to a 4651 basis point decrease in average cost of money market, savings, and escrow accounts. Partially offsetting the decrease in average cost, the average balance increased ~~$95.5~~$97.8 million. Money market accounts continue to be a focus and the Company agressively marketed new and existing customers through various new offerings.
●		Interest expense on borrowings decreased ~~$108,000,~~$196,000, or ~~4.1%~~7.4%, due to a $129.8 million decrease in the average ~~cost~~balance of borrowings ~~of two basis points to 2.10%~~ during the three months ended ~~March 31,~~June 30, 2021 compared to ~~2.12%~~the three months ended June 30, 2020 as additional short-term funding was needed in 2020. Offsetting the decrease in average balance, the cost of borrowings increased 30 basis points to 2.06% during the three months ended ~~March 31, 2020. Additionally, the average borrowing volume decreased $12.9 million~~June 30, 2021, compared to ~~$482.7~~1.76% million during the three months ended ~~March 31,~~June 30, 2020 as the lower rate short-term FHLB borrowings utilized uring 2020 were not necessary during 2021 ~~compared to $495.6 million during the three months ended March 31, 2020. The decrease was primarily~~ due to ~~the increase in average deposits.~~our excess liquidity position.

●		The ~~increase~~decrease in mortgage banking income was primarily the result of ~~an increase~~a decrease in loan origination volume and gross margin on loans originated and sold. Gross margin on loans originated and sold is the ratio of mortgage banking income (excluding the change in interest rate lock fair value) divided by total loan originations. Total loan origination volume on a consolidated basis ~~increased $421.4~~decreased $52.2 million, or ~~61.3%~~4.7%, to $1.06 billion during the three months ended June 30, 2021 compared to $1.11 billion during the three months ended ~~March 31, 2021 compared to $687.7 million during the three months ended March 31,~~June 30, 2020. Gross margin on loans originated and sold ~~increased 19.2%~~decreased 11.8% at the mortgage banking segment. See "Comparison of Mortgage Banking Segment Results of Operations for the Three Months Ended ~~March 31,~~June 30, 2021 and 2020" above for additional discussion of the increase in mortgage banking income.
●		Service charges on loans and deposits ~~increased~~decreased primarily due to a decrease in fees earned on loan ~~prepayment fees.~~swaps originated.
●		The ~~decrease~~increase in cash surrender value of life insurance was due primarily to ~~a decrease~~an increase in ~~balance as death benefit proceeds were received on two policies in~~dividends due to the ~~prior year.~~timing of the annual dividend.
●		The increase in other noninterest income was due primarily to increases in mortgage servicing fee income and wealth management revenue. Mortgage servicing fee income increased as loans sold with servicing rights retained increased due to market conditions.

●		Compensation, payroll taxes and other employee benefits expense at our mortgage banking segment ~~increased $9.9~~decreased $3.0 million, or ~~50.9%~~9.2%, to ~~$29.3~~$29.2 million during the three months ended ~~March 31,~~June 30, 2021. The decrease in compensation expense was primarily related to decreased commission expense and branch manager compensation driven by decreased loan origination volume and branch profitability as gross margins decreased.
●		Compensation, payroll taxes and other employee benefits expense at the community banking segment decreased $32,000, or 0.7%, to $4.9 million during the three months ended June 30, 2021. The decrease was due primarily to a decrease in variable compensation offset by increases in health insurance and employee stock ownership plan expenses.
●		Occupancy, office furniture and equipment expense at the mortgage banking segment decreased $262,000 to $1.4 million during the three months ended June 30, 2021, primarily resulting from lower rent and depreciation expense.
●		Occupancy, office furniture and equipment expense at the community banking segment increased $32,000 to $887,000 during the three months ended June 30, 2021. The increase was due primarily to increased snow removal expense.
●		Advertising expense increased $47,000, or 5.4%, to $911,000 during the three months ended June 30, 2021. This was primarily due to marketing increases at the mortgage banking segment to attract customers as rates are higher than in the prior year. Advertising at the community banking segment decreased as customer promotion slowed.
●		Data processing expense decreased $181,000, or 16.5%, to $914,000 during the three months ended June 30, 2021. This was primarily due to decreased data conversion expenses as the new ditigal banking platform rollout at the community banking segment occured during the three months ended June 30, 2020.
●		Professional fees decreased $508,000 to $569,000 of income during the three months ended June 30, 2021. The decrease related to a decrease in litigation costs compared to the prior year, as the Herrington settlement was resolved in 2020.
●		Other noninterest expense decreased $514,000, or 14.0%, to $3.2 million during the three months ended June 30, 2021. The decrease at the mortgage banking segment related to a decrease in the provision for losses on loans sold as the secondary market that results from both early payoff and early default provisions with investors. The decreased provision is driven by both a decrease in the number and volume of loans sold, as well as actual default activity resulting from the COVID-19 pandemic was lower than expected. Offsetting the decrease at the mortgage banking segment, amortization of mortgage servicing rights increased as the size of the servicing portfolio has increased in 2021 compared to 2020. Additionally, other noninterest expenses decreased at the community banking segment as certain loan expenses decreased offset by a decrease of credits received for FDIC premiums in 2020 but not in 2021.

●		Interest income on loans decreased $3.1 million due primarily to a 35 basis point decrease in average yield on loans as London Interbank Offered Rate (LIBOR) and U.S. Treasury rates continued to decrease and a $4.5 million, or 0.3%, decrease in average loans as payoffs continue to outpace originations. The decrease in average loan balance was driven by a decrease of $73.8 million, or 5.2%, in the average balance of loans held in portfolio offset by a $69.3 million, or 27.3%, increase in the average balance of loans held for sale.
●		Interest income from mortgage related securities decreased $395,000 primarily as the yield decreased 46 basis points. Additionally, the average balance decreased $13.6 million.
●		Interest income from other interest-earning assets (comprised of debt securities, federal funds sold and short-term investments) decreased $28,000 due to a 71 basis point decrease in the average yield. The decrease in average yield was primarily driven by the decrease in federal funds rate over the past year and as higher yielding securities have matured. Offsetting those decreases, the average balance of other interest-earning assets increased $105.7 million along with an increase in FHLB dividends.
●		Interest expense on time deposits decreased $5.2 million, or 71.2%, primarily due to a 141 basis point decrease in average cost of time deposits. Additionally, the average balance of time deposits decreased $34.4 million compared to the prior year period.
●		Interest expense on money market, savings, and escrow accounts decreased $439,000, or 49.3%, due primarily to a 49 basis point decrease in average cost of money market, savings, and escrow accounts offset by an increase in average balance of $96.7 million. Money market accounts have been a focus over the year and the Company has aggressively marketed new customers through various new offerings and new branches that opened within the past 12 months.
●		Interest expense on borrowings decreased $304,000, or 5.8%, due to a decrease of $71.4 million to $481.4 million in average borrowing volume during the six months ended June 30, 2021. The decrease was primarily due to additional short-term funding was needed in 2020. Offsetting the decrease in volume, the average cost of borrowings increased 16 basis points to 2.08% during the six months ended June 30, 2021, compared to 1.92% during the six months ended June 30, 2020 as the lower rate short-term FHLB borrowings utilized during 2020 were not necessary during 2021 due to our excess liquidity position.

●		The increase in mortgage banking income was primarily the result of an increase in loan origination volume offset by a decrease in gross margin on loans originated and sold. Gross margin on loans originated and sold is the ratio of mortgage banking income (excluding the change in interest rate lock fair value) divided by total loan originations. Total loan origination volume on a consolidated basis increased $369.1 million, or 20.6%, to $2.16 billion during the six months ended June 30, 2021 compared to $1.80 billion during the six months ended June 30, 2020. Gross margin on loans originated and sold decreased 1.8% at the mortgage banking segment. See "Comparison of Mortgage Banking Segment Results of Operations for the Six Months Ended June 30, 2021 and 2020" above for additional discussion of the increase in mortgage banking income.
●		Service charges on loans and deposits decreased primarily due to loan fees primarily due to loan prepayment fees. Service charges on loans decreased due to fees earned on loan swap originations in 2020.
●		The increase in cash surrender value of life insurance was due primarily to timing of the annual dividend earned on policyholders.
●		The increase in other noninterest income was due primarily to increases in mortgage servicing fee income and wealth management revenue. Mortgage servicing fee income increased as loans sold with servicing rights retained increased due to market conditions.

	For the				For the
	Three months ended March 31,				Six months ended June 30,
	2021		2020		2021		2020

Real estate loans originated for investment:
Residential
One- to four-family	$	13,256	$	30,515	$	29,685	$	56,970
Multi-family		29,212		26,979		55,029		102,432
Home equity		2,652		1,850		3,225		3,232
Construction and land		9,733		11,710		3,051		21,995
Commercial real estate		1,554		15,137		16,913		25,638
Total real estate loans originated for investment		56,407		86,191		107,903		210,267
Consumer loans originated for investment		23		275		23		275
Commercial business loans originated for investment		9,733		4,390		19,908		41,482
Total loans originated for investment	$	66,163	$	90,856	$	127,834	$	252,024

	At March 31,			At December 31,			At June 30,			At December 31,
	2021			2020			2021			2020
	(Dollars in Thousands)						(Dollars in Thousands)
Non-accrual loans:
Residential
One- to four-family	$	3,734		$	5,072		$	3,896		$	5,072
Multi-family		314			341			317			341
Home equity		59			63			77			63
Construction and land		43			43			43			43
Commercial real estate		30			41			19			41
Commercial		-			-			-			-
Consumer		-			-			-			-
Total non-accrual loans		4,180			5,560			4,352			5,560

Real estate owned
One- to four-family		-			-			-			-
Multi-family		-			-			-			-
Construction and land		150			322			150			322
Commercial real estate		-			-			-			-
Total real estate owned		150			322			150			322
Total nonperforming assets	$	4,330		$	5,882		$	4,502		$	5,882

Total non-accrual loans to total loans		0.31	%		0.40	%		0.34	%		0.40	%
Total non-accrual loans to total assets		0.19	%		0.25	%		0.20	%		0.25	%
Total nonperforming assets to total assets		0.20	%		0.27	%		0.20	%		0.27	%

	At or for the Three Months						At or for the Six Months
	Ended March 31,						Ended June 30,
	2021			2020			2021			2020
	(In Thousands)						(In Thousands)

Balance at beginning of period	$	5,560		$	7,025		$	5,560		$	7,025
Additions		171			1,206			997			1,422
Transfers to real estate owned		-			-			-			(299	)
Charge-offs		-			-			-			(3	)
Returned to accrual status		(902	)		(821	)		(1,359	)		(1,033	)
Principal paydowns and other		(649	)		(608	)		(846	)		(1,576	)
Balance at end of period	$	4,180		$	6,802		$	4,352		$	5,536

●		Applying an updated adjustment factor (as described previously) to an existing appraisal;
●		Confirming that the physical condition of the real estate has not significantly changed since the last valuation date;
●		Comparing the estimated current value of the collateral to that of updated sales values experienced on similar collateral;
●		Comparing the estimated current value of the collateral to that of updated values seen on current appraisals of similar collateral; and
●		Comparing the estimated current value to that of updated listed sales prices on our real estate owned and that of similar properties (not owned by the Company).