Waterstone Financial, Inc., a Maryland Corporation, ("New Waterstone")
was organized in June 2013. Upon completion of the mutual-to-stock conversion
of Lamplighter Financial, MHC in January 2014, New Waterstone became the holding
company of WaterStone Bank SSB ("WaterStone Bank") and succeeded to
all of the business and operations of Waterstone Financial, Inc., a Federal Corporation
("Waterstone-Federal") and each of Waterstone-Federal and Lamplighter
Financial, MHC ceased to exist. In this report, we refer to WaterStone Bank, our
wholly owned subsidiary, both before and after the reorganization, as "WaterStone
Bank" or the "Bank."
WaterStone Bank conducts its community banking business from 11 banking offices
located in Milwaukee, Washington and Waukesha Counties, Wisconsin, as well as
a loan production office in Minneapolis, Minnesota. WaterStone Banks principal
lending activity is originating one- to four-family and multi-family residential
real estate loans for retention in its portfolio.
WaterStone Bank is subject to comprehensive regulation and examination by the
Wisconsin Department of Financial Institutions (WDFI) and the Federal Deposit
Insurance Corporation.
WaterStone Banks executive offices are located at 11200 West Plank Court, Wauwatosa,
Wisconsin 53226, and its telephone number is (414) 761-1000. Its website address
is www.wsbonline.com.
WaterStone Banks 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 scope of the discussion included under "Lending Activities" is
limited to lending operations related to loans originated for investment. A
discussion of the lending activities related to loans originated for sale is
included under "Mortgage Banking Activities."
Wauwatosa Investments, Inc. is WaterStone Banks investment subsidiary headquartered
in the State of Nevada. Wauwatosa Investments, Inc. manages the back office
function for WaterStone Banks investment portfolio. Our Chief Financial Officer
and Treasury Officer are responsible for executing purchase and sales in accordance
with our investment policy and monitoring the investment activities of Wauwatosa
Investments, Inc. The investment policy is reviewed annually by management and
changes to the policy are recommended to and subject to the approval of our
board of directors. Authority to make investments under the approved investment
policy guidelines is delegated by the board to designated employees. While general
investment strategies are developed and authorized by management, the execution
of specific actions rests with the Chief Financial Officer and Treasury Officer
who may act jointly in performing security trades. The Chief Financial Officer
and Treasury Officer are responsible for ensuring that the guidelines and requirements
included in the investment policy are followed and that all securities are considered
prudent for investment. The Chief Financial Officer and the Treasury Officer
are authorized to execute investment transactions (purchases and sales) without
the prior approval of the board provided they are within the scope of the established
Investment Policy.
Our investment policy requires that all securities transactions be conducted
in a safe and sound manner. Investment decisions are based upon a thorough analysis
of each security instrument to determine its quality, inherent risks, fit within
our overall asset/liability management objectives, effect on our risk-based
capital measurement and prospects for yield and/or appreciation.
Deposits have traditionally been our primary source of funds for use in lending
and investment activities. We also rely on advances from the Federal Home Loan
Bank of Chicago and borrowings from other commercial banks in the form of repurchase
agreements collateralized by investment securities. In addition to deposits
and borrowings, we derive funds from scheduled loan payments, investment maturities,
loan prepayments, retained earnings and income on earning assets. While scheduled
loan payments and income on earning assets are relatively stable sources of
funds, deposit inflows and outflows can vary widely and are influenced by prevailing
market interest rates, economic conditions and competition from other financial
institutions.
A majority of our depositors are persons who work or reside in Milwaukee and
Waukesha Counties and, to a lesser extent, other southeastern Wisconsin communities.
We offer a selection of deposit instruments, including checking, savings, money
market deposit accounts, and fixed-term certificates of deposit. Deposit account
terms vary, with the principal differences being the minimum balance required,
the amount of time the funds must remain on deposit and the interest rate. Our
reliance on certificates of deposit has resulted in a higher cost of funds than
would otherwise be the case if demand deposits, savings and money market accounts
made up a larger part of our deposit base. Development of our branch network
and expansion of our commercial products and services and aggressively seeking
lower cost savings, checking and money market accounts are expected to result
in decreased reliance on higher-cost certificates of deposit.