Waterstone Financial, Inc. Debt Disclosure
| 7) | Borrowings |
Borrowings consist of the following:
| December 31, 2025 | December 31, 2024 | |||||||||||||||
| Category | Balance | Weighted Average Rate | Balance | Weighted Average Rate | ||||||||||||
| (Dollars in Thousands) | ||||||||||||||||
| FHLB advances | ||||||||||||||||
| FHLB short-term advances | $ | 216,084 | 3.69 | % | $ | 293,553 | 4.41 | % | ||||||||
| FHLB long-term advances maturing 2027 | 50,000 | 1.73 | % | 80,000 | 2.39 | % | ||||||||||
| FHLB long-term advances maturing 2028 | 40,000 | 3.38 | % | |||||||||||||
| FHLB long-term advances maturing 2029 | 60,000 | 3.48 | % | 70,000 | 3.46 | % | ||||||||||
| FHLB long-term advances maturing 2030 | 40,000 | 3.21 | % | |||||||||||||
| Total FHLB advances | 406,084 | 3.34 | % | 443,553 | 3.89 | % | ||||||||||
| Repurchase agreements | 6,174 | 6.68 | % | 2,966 | 7.49 | % | ||||||||||
| Total borrowings | $ | 3.39 | % | $ | 3.92 | % | ||||||||||
The short-term repurchase agreement represents the outstanding portion of a total $50.0 million commitment with one unrelated bank. The short-term repurchase agreement is utilized by Waterstone Mortgage Corporation to finance loans originated for sale. This agreement is secured by the underlying loans being financed. Related interest rates are based upon the note rate associated with the loans being financed. The short-term repurchase agreement had a $6.2 million balance at December 31, 2025 and a $3.0 million balance at December 31, 2024.
The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. In addition, the Company enters into agreements under which it sells loans held for sale subject to an obligation to repurchase the same loans. Under these arrangements, the Company may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Company to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing arrangements (i.e., secured borrowings) and not as a sale and subsequent repurchase of assets. The obligation to repurchase the assets is reflected as a liability in the Company's consolidated statements of financial condition, while the securities and loans held for sale underlying the repurchase agreements remain in the respective investment securities and loans held for sale asset accounts. In other words, there is no offsetting or netting of the investment securities or loans held for sale assets with the repurchase agreement liabilities. The Company's repurchase agreement is subject to master netting agreements, which sets forth the rights and obligations for repurchase and offset. Under the master netting agreement, the Company is entitled to set off the collateral placed with a single counterparty against obligations owed to that counterparty.
The Company selects loans that meet underwriting criteria established by the Federal Home Loan Bank of Chicago (FHLBC) as collateral for outstanding advances. The Company’s borrowings at the FHLBC are limited to 76% of the carrying value of unencumbered one- to four-family mortgage loans, 62% of the carrying value of home equity loans and 73% of the carrying value of over four-family loans. In addition, these advances are collateralized by FHLBC stock of $19.8 million at December 31, 2025 and $20.3 million at December 31, 2024. In the event of prepayment, the Company is obligated to pay all remaining contractual interest on the advance.
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.