Waterstone Financial (WSBF) risk factors, FY2024 10-K

Risks Related to Regulatory Matters

1. 01We operate in a highly regulated environment and we are subject to supervision, examination and enforcement action by various bank regulatory agencies
2. 02Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions
3. 03Monetary policies and regulations of the Federal Reserve Board could adversely affect our business, financial condition and results of operations
4. 04We are subject to the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to material penalties
5. 05The Federal Reserve Board may require us to commit capital resources to support WaterStone Bank
6. 06We may become subject to enforcement actions even though non-compliance was inadvertent or unintentional

Risks Related to Interest Rates

1. 07Changing interest rates may have a negative effect on our results of operations
2. 08Hedging against interest rate exposure may adversely affect our earnings

Risks Related to Economic Matters

1. 09Changes in economic conditions could adversely affect our earnings, as our borrowers’ ability to repay loans and the value of the collateral securing our loans decline
2. 10Because most of our borrowers are located in the Milwaukee, Wisconsin metropolitan area, a prolonged downturn in the local economy, or a decline in local real estate values, could cause an increase in nonperforming loans or a decrease in loan demand, which would reduce our profits
3. 11Inflation can have an adverse impact on our business and on our customers

Risks Related to Lending Matters

1. 12We intend to increase our commercial business lending, and we intend to continue our commercial real estate and multi-family residential real estate lending, which may expose us to increased lending risks and have a negative effect on our results of operations
2. 13Our allowance for credit losses may prove to be insufficient to absorb life-time losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations
3. 14We are subject to environmental liability risk associated with lending activities

Risks Related to Operational Matters

1. 15We rely heavily on certificates of deposit, which has increased our cost of funds and could continue to do so in the future
2. 16We may not be able to attract and retain skilled people
3. 17Loss of key employees may disrupt relationships with certain customers
4. 18Because the nature of the financial services business involves a high volume of transactions, we face significant operational risks
5. 19Risks associated with system failures, interruptions, or breaches of cybersecurity could negatively affect our earnings
6. 20Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses
7. 21Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes
8. 22Our board of directors relies to a large degree on management and outside consultants in overseeing cybersecurity risk management
9. 23Our funding sources may prove insufficient to replace deposits at maturity and support our future growth
10. 24The soundness of other financial institutions could adversely affect us
11. 25Recently we have held larger levels of certificates of deposit, which has increased our cost of funds and could continue to do so in the future
12. 26Interruption of our customers’ supply chains and federal funding could negatively impact their business and operations and impact their ability to repay their loans
13. 27Changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition, and results of operations

Risks Related to Competitive Matters

1. 28Consumers may decide to use alternative options to complete financial transactions
2. 29Strong competition within our market areas may limit our growth and profitability

Risks Related to Mortgage Banking Operations

1. 30Secondary mortgage market conditions could have a material impact on our financial condition and results of operations
2. 31Changes in the programs offered by secondary market purchasers or our ability to qualify for their programs may reduce our mortgage banking revenues, which would negatively impact our non-interest income
3. 32If we are required to repurchase mortgage loans that we have previously sold, it could negatively affect our earnings

Risks Related to Environmental and Other Global Matters

1. 33Societal responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers
2. 34Our business, financial condition, and results of operations could be adversely affected by natural disasters, health epidemics, and other catastrophic events

Risks Related to Accounting Matters

1. 35Changes in our accounting policies or in accounting standards could materially affect how we report our financial condition and results of operations
2. 36The need to account for certain assets at estimated fair value may adversely affect our results of operations
3. 37Legal and regulatory proceedings and related matters could adversely affect us or the financial services industry in general
4. 38Changes in the valuation of our securities portfolio could adversely affect our profits
5. 39New lines of business or new products and services may subject us to additional risks
6. 40A lack of liquidity could adversely affect our financial condition and results of operations
7. 41Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks
8. 42Acquisitions may disrupt our business and dilute stockholder value
9. 43Various factors may make takeover attempts more difficult to achieve
10. 44Potential downgrades of U.S. government securities by one or more of the credit ratings agencies could have a material adverse effect on our operations, earnings and financial condition