UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A

(RULE 14a-101)

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

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Filed by a Party other than the Registrant ☐

Check the appropriate box:

☐	Preliminary Proxy Statement

☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

☒	Definitive Proxy Statement

☐	Definitive Additional Materials

☐	Soliciting Material Pursuant to Section 240.14a-12

Waterstone Financial, Inc.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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☐	Fee paid previously with preliminary materials.

☐	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

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April 7, 202211, 2024

Dear Fellow Shareholder,

We invite you to attend the virtual Waterstone Financial, Inc. Annual Meeting of Shareholders, which will be held virtuallyat WaterStone Bank SSB, 11200 W. Plank Ct., Wauwatosa, Wisconsin at 9:00 a.m., Central Time, on Tuesday, May 17, 2022.

To participate in the meeting, visit www.cstproxy.com/wsbonline/2022, and enter the 12 digit control number included on your proxy card. You may register for the meeting as early as 9:00 a.m., Central Time, on May 12, 2022. Beneficial investors, who own their investments through a bank or broker, will need to contact Continental Stock Transfer to receive a control number. If you plan to vote at the meeting you will need to have a legal proxy from your bank or broker, or if you would like to join and not vote Continental will issue you a guest control number with proof of ownership. The contact information for Continental Stock Transfer is 1-917-262-2373, or proxy@continentalstock.com.

If you do not wish to participate in the meeting, but you merely wish to listen to the proceedings, we have set up telephone access for those purposes. In that case, please call, toll-free (within the United States and Canada), 1-800-450-7155.  If calling from outside the United States or Canada, please call 1-857-999-9155 (standard rates apply).  The passcode for listening by telephone is 1567487#.21, 2024.

We are furnishing proxy materials to our shareholders over the internet, as permitted by rules adopted by the Securities and Exchange Commission. You may read, print and download our 20212023 Annual Report to Shareholders on Form 10-K and our Proxy Statement at www.cstproxy.com/www.cstproxy.com/wsbonline/2022.2024. On April 7, 2022,11, 2024, we mailed our shareholders a notice containing instructions on how to access these materials and how to vote their shares online. The notice provides instructions on how you can request a paper copy of these materials by mail, by telephone or by e-mail. If you requested your materials via e-mail, the e-mail contains voting instructions and links to the materials on the internet.

You may vote your shares by internet, by telephone, or by regular mail.mail or in person at the Annual Meeting. Instructions regarding the various methods of voting are contained on the notice and on the proxy card.

Proxy Card.

The proxy materials describe the formal business to be transacted at the Annual Meeting. Included in the materials is our Annual Report on Form 10-K, which contains detailed information concerning our activities and operating performance.

On behalf of the board of directors, we request that you vote early as ityour shares now, even if you currently plan to attend the Annual Meeting. This will not prevent you from voting in person, but will assure that your vote is counted if there are any unforeseen disruptions between now and May 17, 2022.counted.

Sincerely,

DOUGLAS S. GORDONWILLIAM F. BRUSS

Chief Executive Officer

WATERSTONE FINANCIAL, INC.



11200 W. Plank Ct.

Wauwatosa, Wisconsin 53226

(414) 761-1000

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 17, 202221, 2024.

_____________________________

To the Shareholders of Waterstone Financial, Inc.:

The 20222024 annual meeting of shareholders of Waterstone Financial, Inc. will be held virtually on Tuesday, May 17, 2022,21, 2024 at 9:00 a.m., Central Time, at www.cstproxy.com/wsbonline/2022WaterStone Bank SSB, 11200 W. Plank Ct., Wauwatosa, Wisconsin for the following purposes:

The board of directors has fixed March 23, 202227, 2024 as the record date for the determination of shareholders entitled to notice of and to vote at the annual meeting and any adjournment thereof. Only shareholders of record at the close of business on that date will be entitled to vote at the annual meeting and any adjournments thereof.

We call your attention to the Proxy Statement accompanying this notice for a more complete statement regarding the matters to be acted upon at the annual meeting. Please read it carefully.

	By Order of the Board of Directors
	William F. Bruss
	President and Secretary

By Order of the Board of Directors

William F. Bruss

Chief Executive Officer

Wauwatosa, Wisconsin

April 7, 2022

11, 2024

PROXY STATEMENT

WATERSTONE FINANCIAL, INC.

11200 W. Plank Ct.

Wauwatosa, Wisconsin 53226

(414) 761-1000

______________________

SOLICITATION AND VOTING

This Proxy Statement and accompanying Proxy Card are furnished to the shareholders of Waterstone Financial, Inc. (“Waterstone Financial” or the “Company”) in connection with the solicitation of proxies by the Waterstone Financial board of directors for use at the annual meeting of shareholders to be held virtually at www.cstproxy.com/wsbonline/2022 onWaterStone Bank SSB, 11200 W. Plank Ct., Wauwatosa, Wisconsin at 9:00 a.m., Central Timeon Tuesday, May 17, 2022,21, 2024, and at any adjournment of the meeting. The 20212023 Annual Report on Form 10‑K is enclosed with the Proxy Statement and contains business and financial information concerning Waterstone Financial. Our proxy materials are being made available to shareholders on or about April 7, 2022.

Record Date and Meeting Information. As a registered stockholder, you received a proxy card, which contains instructions on how to attend the virtual annual meeting, including the website along with your control number. You will need your control number for access. If you do not have your control number, contact our transfer agent, Continental Stock Transfer at (917) 262-2373 or proxy@continentalstock.com.

If your shares of Company common stock are held by a bank, broker or other nominee, you will need to contact your bank, broker or other nominee and obtain a legal proxy. Once you have received your legal proxy, contact Continental Stock Transfer to have a control number generated. The contact information for Continental Stock Transfer is (917) 262-2373, or proxy@continentalstock.com.

A question and answer session will be held during the annual meeting, and shareholders will be able to submit questions prior to the meeting by visiting www.cstproxy.com/wsbonline/2022. Questions may be submitted as early as 9:00 a.m., Central Time, on May 12, 2022, but must be submitted by 12:00 p.m. Central Time on May 16, 2022. The Company will try to answer as many shareholder-submitted questions, as time permits, that comply with the meeting rules of conduct posted on the virtual annual meeting website.11, 2024.

Record Date and Meeting Information. The board of directors has fixed March 23, 202227, 2024 as the record date for the determination of shareholders entitled to notice of and to vote at the annual meeting and any adjournment thereof. Only holders of record of our common stock, the only class of Waterstone Financial stock outstanding as of the close of business on the record date, are entitled to notice of and to vote at the annual meeting. Each share of common stock is entitled to one vote. As of the record date, there were 24,197,13119,916,843 shares of common stock issued and outstanding.

The board of directors of Waterstone Financial knows of no matters to be acted upon at the annual meeting other than as set forth in the notice attached to this Proxy Statement. If any other matters properly come before the annual meeting, or any adjournment thereof, it is the intention of the persons named in the proxy to vote such proxies in accordance with their best judgment on such matters.

Voting Your Shares. Any shareholder entitled to vote may vote either by mailing a properly executed proxy or online as described in the notice to shareholders and the proxy card. Shares represented by properly executed proxies received by Waterstone Financial will be voted at the annual meeting, or any adjournment thereof, in accordance with the terms of such proxies, unless revoked. Where no instructions are indicated, validly executed proxies will be voted “FOR” the proposals set forth in this Proxy Statement for consideration at the Annual Meeting.

A shareholder may revoke a proxy at any time prior to the time when it is voted by filing a written notice of revocation with our corporate secretary at the address set forth above, by delivering a properly executed proxy bearing a later date, using the internet or telephone voting options explained on the Proxy Card, or by voting virtually at the annual meeting. Virtual attendance at the annual meeting will not in itself constitute revocation of a proxy.Card.

Shares in Employee Plans. Any person who owns shares through an allocation to that person’s account under the WaterStone Bank SSB 2015 Amended and Restated Employee Stock Ownership Plan (the “ESOP”) or who has purchased shares in the Employer Stock Fund in the WaterstoneWaterStone Bank SSB 401(k) Plan (the “401(k) Plan”) will receive separate Vote Authorization Forms to instruct the ESOP Trusteetrustee and 401(k) Plan Trusteetrustee how to vote those shares. The deadline for returning instructions is May 10, 2022.14, 2024. The Trusteetrustee of both the ESOP and 401(k) Plan, Principal Trust Company, will vote shares allocated to a plan participant’s account in accordance with the participant’s instructions. Upon the direction of the plan administrator, the Trusteetrustee will vote the unallocated ESOP shares and any allocated ESOP shares for which no voting instructions are received in the same proportion as allocated shares for which it has received voting instructions. In addition, the Trusteetrustee will vote unvoted shares allocated to participants’ accounts in the 401(k) Plan for which no voting instructions are received in accordance with directions received from the plan administrator.

Quorum and Required Vote. A majority of the votes entitled to be cast by the shares entitled to vote, represented in person or by proxy, will constitute a quorum of shareholders at the annual meeting. Shares for which authority is withheld to vote for director nominees and broker non-votes (i.e., proxies from brokers or nominees indicating that such persons have not received instructions from the beneficial owners or other persons entitled to vote shares as to a matter with respect to which the brokers or nominees do not have discretionary power to vote) will be considered present for purposes of establishing a quorum. The inspector of election appointed by the board of directors will count the votes and ballots at the annual meeting.

As to Proposal 1, the election of directors, shareholders may vote “FOR” or “WITHHELD”“WITHHOLD” as to each or all of the nominees. A plurality of the votes cast at the annual meeting by the holders of shares of common stock entitled to vote is required for the election of directors. In other words, the individuals who receive the largest number of votes are elected as directors up to the maximum number of directors in a class to be chosen at the annual meeting. With respect to the election of directors, any shares not voted, whether by withheld authority, broker non-vote or otherwise, will have no effect on the election of directors except to the extent that the failure to vote for an individual results in another individual receiving a comparatively larger number of votes.

As to Proposal 2, the ratification of the independent registered public accounting firm, shareholders may (i) vote “FOR” the ratification; (ii) vote “AGAINST” the ratification; or “AGAINST,” or may(iii) “ABSTAIN” from voting on the matter. The affirmative vote of a majority of the votes cast at the Annual Meeting, without regard to either broker non-votes, or shares as to which the “ABSTAIN” box has been selected on the proxy card, is required to ratify CliftonLarsonAllenFORVIS, LLP as our independent registered public accounting firm for the year ending December 31, 2022.2024.

As to Proposal 3, the advisory, non-binding resolution to approve our executive compensation as described in this Proxy Statement, a shareholder may: (i) vote “FOR” the resolution; (ii) vote “AGAINST” the resolution; or (iii) “ABSTAIN” from voting on the resolution. The affirmative vote of a majority of the votes cast at the Annual Meeting, without regard to either broker non-votes, or shares as to which the “ABSTAIN” box has been selected on the proxy card, is required for the approval of this non-binding resolution. While this vote is required by law, it will neither be binding on Waterstone Financial, Inc. or the board of directors, nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on the members of the board of directors.

Expenses and Solicitation. We will pay all expenses incurred in connection with the solicitation of proxies. Proxies will be solicited principally by mail, but may also be solicited by our directors, officers and other employees in person or by telephone, facsimile or other means of communication. Those directors, officers and employees will receive no compensation therefor in addition to their regular compensation, but may be reimbursed for their related out-of-pocket expenses. Brokers, dealers, banks, or their nominees, who hold common stock on behalf of another will be asked to send proxy materials and related documents to the beneficial owners of such stock, and we will reimburse those persons for their reasonable expenses. In addition, we have entered into an agreement with Laurel Hill Advisory Group, LLC to assist in soliciting proxies for the annual meeting and we have agreed to pay them $5,000, plus out-of-pocket expenses, for these services.

Householding. Some banks, brokers, broker-dealers and other similar organizations acting as nominee record holders may be participating in the practice of “householding” proxy materials. This means that only one copy of the notice of meeting and instructions on how to access the proxy materials and the 20212023 Annual Report may have been sent to multiple stockholders in your household. If you would prefer to receive separate copies of these materials for other stockholders in your household, either now or in the future, please contact your bank, broker, broker-dealer or other similar organization serving as your nominee.

Upon written notice to Mark R. Gerke, Chief Financial Officer, Waterstone Financial, Inc., 11200 W. Plank Ct., Wauwatosa, Wisconsin 53226, or via telephone at (414) 761-1000, we will promptly provide separate copies of the 20212023 Annual Report and/or this Proxy Statement. Stockholders sharing an address who are receiving multiple copies of this Proxy Statement and/or the 20212023 Annual Report and who wish to receive a single copy of these materials in the future will need to contact their bank, broker, broker-dealer or other similar organization serving as their nominee to request that only a single copy of each document be mailed to all stockholders at the shared address in the future.

Limitations on Voting. The Company’s Articles of Incorporation provide that, subject to certain exceptions, record owners of the Company’s common stock that is beneficially owned by a person who beneficially owns in excess of 10% of the Company’s outstanding shares are not entitled to any vote any of the shares held in excess of the 10% limit.

STOCK OWNERSHIP

The following table shows the amount of our common stock held by groups who are beneficial owner of more than 5% of our shares as of December 31, 2021,2023, based upon information filed with the SEC. The “Percent of All Common Stock Outstanding” reflects the percentage of our common stock outstanding as of March 23, 2022.27, 2024.

The following table shows the amount of our common stock beneficially owned by each of our directors, executive officers and directors and executive officers as a group, as of March 23, 2022.27, 2024. Unless otherwise noted, the persons listed have sole voting and dispositive power over their shares.

______________________

PROPOSAL 1 – THE ELECTION OF DIRECTORS

Effective upon completion of the annual meeting, Waterstone Financial’s board of directors will consistconsists of seven members. Our bylaws provide that approximately one-third of the directors are to be elected annually. Directors of Waterstone Financial are generally elected to serve for a three-year period and until their respective successors have been duly elected and qualified. Directors Ellen S. BartelDouglas Gordon and Kristine A. Rappé,Patrick Lawton, whose terms expire at the annual meeting, are being nominated for re-election as directors, each for a term expiring at the 20252027 annual meeting of shareholders. Shares represented by proxies will be voted FOR the election of the nominees unless otherwise specified by the executing shareholder. If a nominee declines or is unable to act as a director, proxies may be voted with discretionary authority for a substitute nominee designated by the board. Except as indicated herein, there are no arrangements or understandings between any nominee and any other person pursuant to which such nominee was selected.

The following details include for each of our nominees and directors: their age as of December 31, 2021;2023; the year in which they first became a director of WaterStone Bank, the operating subsidiary of the Company; the year that their term expires; and their business experience for at least the past five years. The members of the Company’s board of directors are the same as the members of the board of directors of WaterStone Bank. None of the directors listed below currently serves as a director, or served as a director during the past five years, of a publicly-held entity (other than Waterstone Financial). The following also includes the particular experience, qualifications, attributes, or skills considered by the Nominating and Corporate Governance Committee that led the board of directors to conclude that such person should serve as a director of Waterstone Financial. The mailing address for each person listed is 11200 W. Plank Ct., Wauwatosa, Wisconsin 53226. The board of directors unanimously recommends that shareholders vote FOR the election of the director nominees listed below.

Executive Officers

Information regarding our named executive officers (“Named Executive Officers” or “NEOs”) who are not directors of Waterstone Financial is set forth in the following table. Except as noted below, each of these individuals has held that position for at least the past five years.

Meetings and Committees

The board of directors of Waterstone Financial met 12 times during the year ended December 31, 20212023 on behalf of Waterstone Financial and 12 times in their capacity as directors of WaterStone Bank. The board of directors consists of a majority of “independent directors” within the meaning of the NASDAQ corporate governance listing standards. The board of directors determines the independence of each director in accordance with NASDAQ Stock Market rules, which include all elements of independence as set forth in the listing requirements for NASDAQ securities. The board of directors has determined that Directors Bartel, Dalum, Hansen, Lawton, Rappé, Schmidt and Tyus are “independent” directors within the meaning of such standards. In evaluating the independence of our independent directors, we found no transactions between us and our independent directors that are not required to be reported in this Proxy Statement and that had an impact on our determination as to the independence of our directors. Additionally, the independent directors regularly meet without management or non-independent directors present. No member of the board of directors or any committee thereof attended fewer than 75% of the aggregate of: (i) the total number of meetings of the board of directors (held during the period for which each director has been a director); and (ii) the total number of meetings held by all committees of the board of directors on which he or she served (during the periods that he or she served).

We conduct business through meetings of the Company’s and Bank’s boards of directors and their committees. The boards of directors of the Company and the Bank have established standing committees discussed below. The standing committees of the Company include an Audit Committee, Compensation Committee, Executive Committee and a Nominating and Corporate Governance Committee. Each of these committees operates under a written charter available on the Company’s website at www.wsbonline.com.

The following table details the composition of our board committees, eachas of whichDecember 31, 2023. Each committee is composed entirely of independent directors.

Douglas S. Gordon was appointed to the Executive Committee effective on January 5, 2024.

Audit Committee. The audit committee of Waterstone Financial (the “Audit Committee”) met tensix times during the year ended December 31, 2021.2023. The board of directors has determined that each member of the Audit Committee meets not only the independence requirements applicable to the committee as prescribed by the NASDAQ corporate governance listing standards, but also by the Securities and Exchange Commission. On behalf of the Audit Committee, Mr. Hansen, its chair, also regularly consults with Waterstone Financial’s independent registered public accounting firm about Waterstone Financial’s periodic public financial disclosures. The board believes that all of the members of the Audit Committee have sufficient experience, knowledge and other personal qualifications to be “financially literate” and to be active, effective and contributing members of the Audit Committee. Mr. Hansen has been designated an “audit committee financial expert” pursuant to the Sarbanes-Oxley Act of 2002 and the Securities and Exchange Commission regulations. See also “Report of the Audit Committee” for other information pertaining to the Audit Committee.

Compensation Committee. The compensation committee of Waterstone Financial (the “Compensation Committee”) held tenseven meetings during the year ended December 31, 2021.2023. Each member of the Compensation Committee is considered independent as defined in the NASDAQ corporate governance listing standards. The Compensation Committee has the responsibility for and authority to either establish or recommend to the board: compensation policies and plans; salaries, bonuses and benefits for all officers; salary and benefit levels for employees; determinations with respect to stock options and restricted stock awards; and other personnel policies and procedures. The Compensation Committee has the authority to delegate the development, implementation and execution of benefit plans to management. See also “Compensation Discussion and Analysis” and “Compensation Committee Interlocks and Insider Participation” for other information pertaining to the Compensation Committee.

Executive Committee. The executive committee of Waterstone Financial (the “Executive Committee”) held 11 meetings during the year ended December 31, 2023. The Executive Committee has the responsibility to review and/or approve certain loans made or to be made by the Bank in accordance with the Bank’s Lending Policy. The Executive Committee reviews loan submissions, communicate requests for additional information, and promptly communicate the approval or disapproval of a loan to management.

Nominating and Corporate Governance Committee. The nominating and corporate governance committee (“Nominating Committee”) of Waterstone Financial held two meetingsone meeting during the year ended December 31, 2021.2023. Each member of the Nominating Committee is considered “independent” as defined in the NASDAQ corporate governance listing standards.

The functions of the Nominating Committee include the following:

The Nominating Committee identifies nominees by first evaluating the current members of the board of directors willing to continue in service. Current members of the board of directors with skills and experience that are relevant to our business and who are willing to continue in service are first considered for re-nomination, balancing the value of continuity of service by existing members of the board of directors with that of obtaining new perspectives. If any member of the board of directors does not wish to continue in service, or if the committee or the board decides not to re-nominate a member for re-election, the Nominating Committee may solicit suggestions for director candidates from all directors.

Board Diversity. The Boardboard believes that the Company and its shareholders are best served by having a Board of Directors that brings a diversity of education, experience, skills and perspective to Board meetings. While these attributes are considered on an ongoing basis, the Nominating and Corporate Governance Committee and the Board of Directors will particularly consider such diversity in the recruitment and deliberation regarding prospective director nominees.

Board Qualifications. Qualifications of director candidates are described in the Appendix to the Nominating and Corporate Governance Committee Charter, which can be found on our website, at www.wsbonline.com, on the “Investor Relations” link under the “About” tab, then “Corporate Overview” and “Governance Documents.” Factors considered include strength of character, honesty and integrity, an inquiring and independent mind, judgment, skill, diversity, education, experience with businesses and other organizations, the interplay of the candidates’ experience with the experience of other board members and the extent to which the candidate would be a desirable addition to the board and its committees. Nominees must have a background which demonstrates an understanding of business and financial affairs and the complexities of a business organization. Although a career in business is not essential, the nominee should have a proven record of competence and accomplishments through leadership in industry, education, the professions or government. Areas of core competency that should be represented on the board as a whole include accounting and finance, business judgment, management, crisis response, industry knowledge, leadership and strategic vision.

Director Election Voting Standard. A nomineefor director shall be elected to the Board if he or she receives approval on a plurality of votes cast.Since our organization as a Company, we have not yet had a director elected by less than a majority of the votes cast. Given our plurality voting standard, the Board is committed to conducting extensive shareholder outreach to understand any concerns, in the event that a director nominee fails to receive majority support in any future election.

Board Term or Age Limits. The Board does not currently employ formal term or age limits with respect to Board service. Rather than instituting a formal term or age limit, the Board employs an annual assessment to measure how well the skills of board members align with the current strategy of the Company. The foundation of this assessment is summarized in a Director Skills Matrix (detailed below).

Board Evaluation. The Board views the process of collective and individual self-assessment as an opportunity to enhance multiple dimensions of board effectiveness and strengthen governance practices. Currently, this evaluation process takes place in an informal manner before, during and after Board and Committee meetings.The Board is in the process of developing a framework for an annual assessment process that will be utilized to perform evaluations at a Board, Committee and/or Director level.Further, the Board is committed to expanding disclosures in future proxy statements to demonstrate the rigor of the board evaluation process.

Director Skills, Experience and Demographics Matrix. The following matrix provides information about the board of directors, including certain types of knowledge, skills, experience and other attributes possessed by one of more of them which the Board believes are relevant to the Company’s business and industry. The matrix does not capture all of the knowledge, skills and experiences possessed by the directors, and the Board believes that each director has the ability to contribute to the decision-making process in every area listed.

The Nominating Committee will also take into account whether a candidate satisfies the criteria for “independence” under the NASDAQ corporate governance listing standards and, if a nominee is sought for service on the Audit Committee, the financial and accounting expertise of a candidate, including whether an individual qualifies as an “audit committee financial expert.”

The Nominating Committee will consider proposed nominees whose names are submitted to it by shareholders, and it does not intend to evaluate proposed nominees differently depending upon who has made the proposal. Shareholders can submit the names of qualified candidates for director by writing to our Corporate Secretary at 11200 W. Plank Ct., Wauwatosa, Wisconsin 53226. The Corporate Secretary must receive a submission not earlier than the 90th day nor later than the 80th day prior to date of the annual meeting; provided, however, that in the event that less than 90 days’ notice or prior public disclosure of the date of the annual meeting is provided to shareholders, then, to be timely, notice by the stockholder must be so received not later than the tenth day following the day on which public announcement of the date of such meeting is first made. The submission must include the following information:

A nomination submitted by a shareholder for presentation at an annual meeting of shareholders will also need to comply with any additional procedural and informational requirements we may adopt in the future, including those set forth in our Bylaws and in the “Shareholder Proposals and Notices” section of this Proxy Statement.

Waterstone Financial has adopted charters for the Audit, Compensation and Nominating Committees. We will continue to respond to and comply with Securities and Exchange Commission and NASDAQ Stock Market requirements relating to board committees. Copies of the charters for our Audit, Compensation and Nominating Committees (including director selection criteria) and other corporate governance documents can be found on our website, at www.wsbonline.com, on the “Investor Relations” link under the “About” tab, then “Corporate Overview” and “Governance Documents.” If any of those documents are changed, or related documents adopted, those changes and new documents will be posted on our corporate website at that address.

Other Board and Corporate Governance Matters

Board Leadership Structure and Risk Oversight Role.  The role of chairman of the board of directors and chief executive officer of the Company are not currently held by the same person. The chairman of the board has never been an officer or employee of the Company or WaterStone Bank. The foregoing structure is not mandated by any provision of law or our Articles of Incorporation or Bylaws, but the board of directors currently believes that this structure provides for an appropriate balance of authority between management and the board. The board of directors reserves the right to establish a different structure in the future.

The board of directors of the Company, all of the members of which are also members of the board of directors of WaterStone Bank, is actively involved in the Company’s and Bank’s risk oversight activities, through the work of numerous committees of the Company and Bank, and the policy approval function of the board of directors of WaterStone Bank.

Communications Between Shareholders and the BoardShareholder Communication. We are committed to open and ongoing dialog with our shareholders and we regularly seek feedback on a variety of issues, including business strategy, governance, executive compensation and any other topics shareholders wish to discuss. To this end, we engage with our shareholders in a variety of ways in order to obtain their feedback. In addition to shareholder outreach, the Board of Directors welcomes communication from our shareholders. A shareholder who wants to communicate with the board of directors or with any individual director can write to our Corporate Secretary at 11200 W. Plank Ct., Wauwatosa, Wisconsin 53226, Attention: Board Administration. The letter should indicate that the author is a shareholder and if shares are not held of record, should include appropriate evidence of stock ownership. Depending on the subject matter, management will:

At each board meeting, management shall present a summary of all communications received since the last meeting that were not forwarded and make those communications available to the directors.

Board Involvement in Risk Management Process. As part of its overall responsibility to oversee the management, business, and strategy of the Company., one of the primary responsibilities of our Board of Directors is to oversee the amounts and types of risk taken by management in executing the corporate strategy, and to monitor our risk experience against the policies and procedures set to control those risks. The Board’s risk oversight function is carried out through its approval of various policies and procedures, such as our lending and investment policies; ratification or approval of investments and loans exceeding certain thresholds; and regular review of risk elements such as interest rate risk exposure, liquidity, and problem assets. Some oversight functions are delegated to committees of the Board, with such committees regularly reporting to the full Board the results of their oversight activities. For example, the Audit Committee is responsible for oversight of the independent registered public accounting firm and meets directly with the firm at various times during the course of the year.

Board Oversight of Information and Cybersecurity. As a financial institution, cybersecurity presents a significant operational and reputational risk. Accordingly, we take the protection of customer and business information very seriously. We have developed a robust information/cyber security program designed to protect the confidentiality, integrity, and availability of business and customer information. As part of this program, our Chief Information Officer reports to the Board of Directors on a regular basis. Reports include information and cyber security assessment results, business continuity, disaster recovery, and incident response planning and testing, vendor management program status, and independent audit results. All information security-related policies are reviewed and approved annually by the Board.

We promote a culture of continuous learning that has resulted in a highly experienced information security team. In addition to our own experienced information security team, we also partner with industry experts for managed security services such as threat intelligence, firewall, intrusion detection, and intrusion prevention services to ensure protection around the clock. Highlights of the information and cybersecurity program include the following:

Director Attendance at Annual Shareholders’ Meeting. Although we do not have a formal policy regarding director attendance at the annual meeting, we encourage all of our directors to attend. Last year the seven directors serving at that time were present at the annual meeting.

Code of Business Conduct and Ethics. Waterstone Financial has adopted a code of business conduct and ethics that reflects current circumstances and Securities and Exchange Commission and NASDAQ definitions for such codes. The code of business conduct and ethics covers us, WaterStone Bank and other subsidiaries. Among other things, the code of business conduct and ethics includes provisions regarding honest and ethical conduct, conflicts of interest, full and fair disclosure, compliance with law, and reporting of and sanctions for violations. The code applies to all directors, officers and employees of Waterstone Financial and subsidiaries. We have posted a copy of the code of business conduct and ethics on our website, at www.wsbonline.com, on the “Investor Relations” link under the “About” tab, then “Corporate Overview” and “Governance Documents.” As further matters are documented, or if those documents (including the code of business conduct and ethics) are changed, waivers from the code of business conduct and ethics are granted, or new procedures are adopted, those new documents, changes and/or waivers will be posted on the corporate website at that address.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Waterstone Financial board of directors was created in accordance with Section 3(a)(58)(a) of the Securities Exchange Act.Act of 1934, as amended (the “Exchange Act”). The Audit Committee’s functions include meeting with our independent registered public accounting firm and making recommendations to the board regarding the independent registered public accounting firm; assessing the adequacy of internal controls, accounting methods and procedures; review of public disclosures required for compliance with securities laws; and consideration and review of various other matters relating to the our financial accounting and reporting. No member of the Audit Committee is employed by or has any other material relationship with us other than as a customer or shareholder. The members are “independent” as defined in Rule 5605(a)(2) of the NASDAQ listing standards. The board of directors has adopted a written charter for the Audit Committee which can be found on our website.

In connection with its function to oversee and monitor our financial reporting process, the Audit Committee has done the following:

The Audit Committee:

Michael L. Hansen, Chairman

Ellen S. Bartel

Thomas E. Dalum

Kristine A. Rappé

Derek L. Tyus

The information contained in the above report will not be deemed to be “soliciting material” or “filed” with the SEC, nor will this information be incorporated into any future filing under the Securities Act of 1933, as amended, (the “Securities Act”), or the Exchange Act except to the extent the Company specifically incorporates such report by reference.

Based on the foregoing, the Audit Committee recommended to the board that those audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2021.2023. In addition, the Audit Committee also considered the fees paid to CliftonLarsonAllenFORVIS LLP for services provided by CliftonLarsonAllenFORVIS LLP during the year ended December 31, 2021.2023.

PROPOSAL 2 – RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The firm of CliftonLarsonAllenFORVIS LLP has audited the financial statements of Waterstone Financial as of and for the year ended December 31, 20212023 and hashad served as Waterstone Financial’s principal independent accountant since 2021. Representatives of CliftonLarsonAllen LLP are expected to be present at the annual meeting to respond to appropriate questions and to make a statement if they so desire.2023.

The Audit Committee of the Board of Directors has selected CliftonLarsonAllenFORVIS LLP as our independent registered public accountants for the fiscal year ending December 31, 2021.2023. We are submitting the selection of independent registered public accountants for shareholder ratification at the annual meeting. Although not required by the Company’s Articles of Incorporation or Bylaws, the Company has determined to ask shareholders to ratify this selection as a matter of good corporate practice. If the appointment of CliftonLarsonAllenFORVIS LLP is not ratified, the Audit Committee will consider the shareholders’ vote when determining whether to continue the firm’s engagement, but may ultimately determine to continue the engagement of the firm or another audit firm without re-submitting the matter to shareholders. Even if the appointment of CliftonLarsonAllenFORVIS LLP is ratified, the Audit Committee may in its sole discretion terminate the engagement of the firm and direct the appointment of another independent registered public accounting firm at any time during the year if it determines that such an appointment would be in the best interests of our Company and our shareholders.

RSM USCliftonLarsonAllen LLP was previously the principal accountants for Waterstone Financial, Inc. On May 27, 2021January 17, 2023, CliftonLarsonAllen, Waterstone Financial, Inc.’s independent registered public accountant, informed the firmCompany that CliftonLarsonAllen would decline to stand for re-appointment after completion of the audit for the year ended December 31, 2022, as a result of CliftonLarsonAllen’s determination to cease providing certain audit services to SEC registrants upon completion of the 2022 audit cycle. On February 28, 2023, CliftonLarsonAllen completed its audit of the Company’s consolidated financial statements as of and for the year ended December 31, 2022. Accordingly, as of February 28, 2023, CliftonLarsonAllen was dismissed as Waterstone Financial's principal accountants. The decision to dismiss RSM US LLP was approved byno longer the Audit Committee of Waterstone Financial.Company’s independent registered public accountant.

DuringCliftonLarsonAllen’s audit reports on the Company’s consolidated financial statements as of and for the years ended December 31, 20202022 and 20192021 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During the subsequent interim period through May 27,fiscal years ended December 31, 2022 and 2021, there were no: (1) disagreements with RSM US LLPCliftonLarsonAllen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to their satisfaction, would have caused them to make reference in connection with their opinion to the subject matter of the disagreement, or (2) reportable events under Item 304(a)(1)(v) of Regulation S-K.

The audit reports of RSM US LLPAs previously disclosed on the consolidated financial statements of Waterstone Financial as of and for the years ended December 31, 2020 and 2019 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.

A letter from RSM US LLP addressed to the Securities and Exchange Commission stating whether it agrees with the above statements was filed as an exhibit to Waterstone Financial's Report on Form 8-K filed with the Securities and Exchange Commission on June 2, 2021.

On June 2, 2021, Waterstone Financial engaged CliftonLarsonAllen LLP as Waterstone Financial’s new principal accountants for the year ending December 31, 2021. The engagement was approved byJanuary 17, 2023, the Audit Committee of the Board of Directors of Waterstone Financial. DuringFinancial, Inc. approved the years endedappointment of FORVIS LLP to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2020 and 2019, and2023 after a competitive request for proposal process. The appointment of FORVIS LLP was effective upon completion of the subsequent interim period prioraudit of the Company’s consolidated financial statements for the fiscal year ending December 31, 2022 by CliftonLarsonAllen, which occurred on February 28, 2023. Prior to retaining FORVIS LLP, neither the engagement of CliftonLarsonAllenCompany nor anyone acting on its behalf consulted with FORVIS LLP Waterstone Financial did not consult with CliftonLarsonAllen LLP regardingrespect to any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.

As reflected in the tables below, Waterstone Financial incurred fees in fiscal year 2021 for professional services provided by CliftonLarsonAllen LLP related to that period. Waterstone Financial incurred fees in fiscal years 2021 and 2020 for professional services provided by RSM US LLP related to such periods.

As reflected in the tables below, Waterstone Financial incurred fees in fiscal years 20212023 and 20202022 for professional services provided by CliftonLarsonAllen LLP and RSM US LLP related to those periods.

⁽¹⁾         Audit fees consist of professional services rendered for the audit of our consolidated financial statements and review of SEC Filings. Audit fees also include professional fees rendered for the audit of the stand–alone financial statements of Waterstone Mortgage Corporation.

⁽²⁾         Audit-related fees consisted of the transition and consent on Form S-8 in the 10-k.

Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of the Independent Registered Public Accounting Firm

The Audit Committee’s policy is to pre-approve all audit and non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The Audit Committee has delegated pre-approval authority to its Chairman when expedition of services is necessary. The independent registered public accounting firm and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date. All audit services for the past two fiscal years were pre-approved by the Audit Committee.

COMPENSATION DISCUSSION AND ANALYSIS

Overview of Compensation Program

Executive Summary. The Compensation Committee provides our Named Executive Officers with a total compensation package that is market competitive, promotes the achievement of our strategic objectives and is aligned with operating and other performance metrics to support long-term shareholder value. In addition, we have structured our executive compensation program to include elements that are intended to create appropriate balance between risk and reward.

Compensation Philosophy. The primary objectives of our executive compensation programs are to attract and retain highly-qualified executives and to encourage extraordinary management efforts through well-designed incentive opportunities, with the goal of improving the performance of Waterstone Financial, Inc. and its subsidiaries consistent with the interests of our shareholders. We base our compensation decisions on three basic principles:

Elements of our Executive Compensation and Benefits Program. To achieve our objectives, we have structured an executive compensation program that provides our Named Executive Officers with the following:

The programs are intended to reward the accomplishment of strategic plan goals and objectives as evaluated by members of the Compensation Committee. They are further intended to reward enhanced shareholder value as measured by the trading price of our common stock. The elements of a Named Executive Officer’s total compensation package will vary depending upon the executive’s job position and responsibilities.

Compensation Polices and Highlights

Our compensation programs include, among others, the following best practices:

What We Do

What We Do Not Do

Shareholder Say-on-Pay Advisory Votes

We provide our shareholders with the opportunity to cast an annual advisory vote on executive compensation (a “say-on-pay proposal”). At our 20212023 annual meeting of shareholders, over 96%94% of the votes cast (excluding abstentions and broker non-votes) on the say-on-pay proposal at that meeting were voted in favor of the proposal.

We have held annual say-on-pay votes since 2010, and we will continue to hold annual say-on-pay votes until the next shareholders vote regarding the frequency of say-on-pay votes, which we expect to occur at the 2026 annual meeting of shareholders.

The Compensation Committee will continue to consider the outcome of our say-on-pay vote, regulatory changes and emerging best practices when making future compensation decisions for the Named Executive Officers.

Named Executive Officer Compensation Process, Programs and Polices

Role of the Compensation Committee. The Compensation Committee is responsible for reviewing all compensation components for the Named Executive Officers annually, including base salary, annual incentive, long-term incentives/equity, benefits and other perquisites. The Compensation Committee examines the total compensation mix, pay-for-performance relationship, and how all these elements in the aggregate comprise each executive’s total compensation package to ensure that our compensation is competitive in the market place and that the mix of benefits accurately reflects our compensation philosophy. The Compensation Committee operates under a written charter that establishes its responsibilities. The Compensation Committee and the board of directors review the charter annually to ensure that the scope of the charter is consistent with the role of the Compensation Committee. A copy of the charter can be found on our website on the “Investor Relations” link under the “About” tab, then “Corporate Overview” and “Governance Documents.”

Role of Management. The executive officers who serve as a resource to the Compensation Committee are the President and Chief Executive Officer, with respect to compensation for the other Named Executive Officers, and the President, Chief Operating Officer and General Counsel and the Assistant Vice President and Director of Human Resources, with respect to compensation of other officers and employees of WaterStone Bank. The executives provide the Compensation Committee with data, analyses, input and recommendation. The Compensation Committee considers our Chief Executive Officer’s evaluation of each Named Executive Officer’s performance and recommendation of appropriate compensation. However, our Chief Executive Officer does not participate in any decisions relating to his own compensation.

Role of Compensation Consultant. The Compensation Committee has the authority to engage compensation consultants from time to time to assist it in the compensation governance process for determining the compensation of our Named Executive Officers. In 2021,Over the past three years, the Compensation Committee continued its engagement ofhas utilized Meridian Compensation Partners, LLC, or Meridian, as its independent compensation consultant. Meridian is engaged directly by the Compensation Committee. Pursuant to its engagement, Meridian provides research, data analyses, survey information and design expertise in developing compensation programs for executives and incentive programs for eligible employees. In addition, Meridian keeps the Compensation Committee apprised of regulatory developments and market trends related to executive compensation practices. Meridian does not determine the exact amount or form of executive compensation for and of the Named Executive Officers.

Benchmarking Compensation. The Compensation Committee assesses the components of executive compensation with advice from its independent compensation consultant. During 2018,In prior years, Meridian has provided an analysis of base salary, annual incentive and long-term incentive practices of comparable companies in the financial industry. Meridian considered individual compensation elements as well as the total compensation package. This analysis was considered by the Compensation Committee, and served as a basis, when it established 20212023 compensation opportunities for executives. In conducting this analysis, the Compensation Committee reviewed market data using publicly disclosed compensation information from a peer group of comparable financial institutions ranging in asset size from $1.6$1.5 billion to $4.4$9.4 billion. In addition to asset size, peer group selection was also focused on banks with significant mortgage banking operations, a significant focus on real estate lending and/or banks that were recent mutual-to-stock conversions.

For 2021,2023, the Compensation Committee approved the following peer group for purposes of evaluating the appropriateness of the compensation package for the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief Credit Officer, and Chief Retail Officer:

Stock Ownership Guidelines. To align the interests of the Company’s Named Executive Officers and non-employee directors with the interests of the Company’s shareholders, in 2019, the Company implementedmaintains stock ownership guidelines, wherewhereby Named Executive Officers of WaterStone Bank are required to own shares of common stock equal to a specified multiple of their annual base salary and non-employee directors are required to own shares of common stock equal to a multiple of such director’s annual board cash retainer. The applicable levels are as follows:

Named Executive Officers and non-employee directors have five years from the date that the individual first become subject to the guidelines to meet these ownership requirements. In calculating equity ownership for purposes of this requirement, we include all shares beneficially owned by an individual in the Company’s benefit plans (e.g. 401(k) and Employee Stock Ownership Plan), shares of restricted stock and shares with respect to which an individual has voting or investment power. For purposes of our stock ownership requirements, we do not include unexercised stock options, whether vested or non-vested. As of December 31, 2021,2023, all directors were in compliance with the Company’s stock ownership guidelines. As of December 31, 2021,2023, all Named Executive Officers that have been employed with the Company for at least five years were in compliance with the Company’s stock ownership guidelines.

Clawback Policy.Policies. Our compensation program includes a Clawback Policy, whichPolicies. One of our policies provides that in the event that the Company is required to prepare an accounting restatement due to its material noncompliance with financial reporting requirements under U.S. securities laws, the Company shall, to the extent permitted by governing law, pursue reimbursement of any performance-based compensation paid to aan executive officer, including the Named Executive Officer,Officers, to the extent such payments and grants were made to the Named Executive Officer during the three-year period preceding the date on which the Company is required to prepare an accounting restatement based on the erroneous data, provided that the Compensation Committee or determine that the amount of any such performance-based compensation actually paid or awarded to the Named Executive Officer would have been a lower amount had it been calculated based on such restated financial statements. In addition, we have adopted a second clawback policy, whereby we are required to recover incentive-based compensation erroneously awarded to an executive officer during the three completed fiscal years preceding an accounting restatement, with the amount required to be recovered generally calculated as the difference between what was paid to the executive officer and what the executive officer would have received based on the restated amounts.

Components of Executive Compensation

Overview. Our compensation program consists of five main components: base salary, annual incentives, long-term incentive/equity, broad-based welfare and retirement benefit plans and perquisites. The following section summarizes the role of each component, how decisions are made and the resulting 20212023 decision process as it relates to the named executive officers.Named Executive Officers.

Base Salary. We provide a base salary for Named Executive Officers commensurate with the services provided to the Company. We believe that a portion of total direct compensation should be provided in a form that is fixed and liquid. In determining the base salary of executive officers for 2021,2023, the Compensation Committee reviewed, among other things, third-party surveys of peer institutions, the historical compensation of those officers under review, any increased level of responsibility and performance measures of Waterstone Financial Inc. and its subsidiaries. Base salaries for Named Executive Officers other than the Chief Executive Officer are determined based upon recommendations made by the Chief Executive Officer. Base salary for the Chief Executive Officer is determined by the Compensation Committee.

Annual Incentive Plan. We maintain an Annual Incentive Plan which provides Named Executive Officers of WaterStone Bank with annual cash incentive opportunities for annual performance. The ability to earn any award is primarily contingent on the Company achieving consolidated financial-based metrics. These metrics are measured against actual results or actual results compared to our annual budget. The objective of our Annual Incentive Plan is to motivate and reward executives for achieving or exceeding annual financial, strategic and operational goals that we believe will help us maintain long-term profitable growth, maintain asset quality and support value creation for shareholders. The Chief Executive Officer of Waterstone Mortgage Corporation did not participate in the Annual Incentive Plan during the year ended December 31, 2021.2023. Mr. McGuiness participated in a cash-based annual incentive plan as set forth in his employment agreement.

Incentive awards are calculated based upon the Company’s performance in one of three or four weighted financial-based measures along with a potential discretionary portion contingent upon achievement of strategic or operational non-financial objectives. With respect to the financial-based measures, performance was measured against the Board-approved 20212023 budget. To receive any award under the Annual Incentive Plan, the named executive officerNamed Executive Officer must be actively employed on the day the award is made.

Performance Measures

In designing the Annual Incentive Program, the Compensation Committee emphasized the Company’s goals of maintaining profitability and enhancing our franchise value through growth of our commercial loan portfolio and core deposits. The Compensation Committee determined that to encourage these goals, the Annual Incentive Plan would include the following performance measures:

Target Annual Incentive Opportunities

Target annual incentive awards are defined at the beginning of the year in consideration of market data, each NEO’sNEOs total compensation package and the Company’s budgetary considerations. The following table sets forth information concerning Annual Incentive Plan opportunities for 2021:2023:

Performance Measures

Each NEO had pre-defined performance objectives based upon measurable performance of our Company. In addition, each NEO had the opportunity to earn incentive award based upon individual performance.

The weights of the performance objectives for each NEO for 20212023 are summarized in the following table:

The opportunity to earn incentive award based upon individual performance is rooted in each individual’s contribution to the achievement of a variety of tactical and strategic Company goals. While not limited to the following items, the Committee considers each individuals contribution relative to:

Performance Results and Payouts

The Committee determines the final amount of each participant’s award based upon the attainment of the applicable performance goals. Each element of the annual cash incentive award is independent of the other. Accordingly, the Named Executive Officer may achieve certain performance goals, whileand, at the same time, fail to achieve others. In that case, the Named Executive Officer would be entitled to receive the award for the performance goal achieved, but not an award for a performance goal for which the threshold performance was not achieved. 20212023 performance goals and actual performance were as follows:

Based upon the above financial performance measures and the Compensation Committee’s discretion with respect to individual performance, the 20212023 annual cash incentive payments were awarded as follows relative to the 20212023 target value:

Annual Incentive Plan – Waterstone Mortgage Corporation. We maintain an Annual Incentive Plan which provides executive officers of Waterstone Mortgage Corporation with annual cash incentive opportunities for annual performance. The ability to earn any award is primarily contingent on the Company achieving financial-based metrics relative to the mortgage banking operation segment. These metrics are measured against actual results or actual results compared to our annual budget. The objective of our Annual Incentive Plan is to motivate and reward executives for achieving or exceeding annual financial, strategic and operational goals that we believe will help us maintain long-term profitable growth, maintain asset quality and support value creation for shareholders. Incentive awards are calculated based upon the Waterstone Mortgage Corporation’s performance relative to pre-tax income. Performance was measured against the Board-approved 20212023 budget. To receive any award under the Annual Incentive Plan, the named executive officerNamed Executive Officer must be actively employed on the day the award is made.

Target Annual Incentive Opportunities

Target annual incentive awards are defined at the beginning of the year in consideration of market data, Mr. McGuiness’ total compensation package and the Company’s budgetary considerations. The following table sets forth information concerning Annual Incentive Plan opportunities for 2021:2023:

Performance Results and Payouts

The Compensation Committee determines the final amount of each participant’s award based upon the attainment of the applicable performance goal. 2021The 2023 performance goals and actual performance were as follows (dollars in thousands):

As a result of Waterstone Mortgage Corporation’s achievement of 302% ofperformance relative to the target metric, Mr. McGuiness qualifieddid not qualify for and was awardedor receive the maximum incentive payment of $300,000 for the year ended December 31, 2021.2023.

Equity-Based Compensation. The overall objective for our equity-based compensation is to provide an equitable and competitive means to reward our officers for their contributions to our long-range success. Our goal is to meet the following objectives:

All equity awards granted to the Named Executive Officers of Waterstone Financial Inc. are at the discretion of the Compensation Committee. The Compensation Committee considers the position of the Named Executive Officer, the officer’s level of influence and the corresponding ability to contribute toward the success of Waterstone Financial, Inc., and individual and corporate performance as well as the level of equity awards granted to individuals with similar positions at similar companies.

In recentprior years, we have utilized restricted stock as our primary long-term incentive tool to retain and motivate our key employees. We believe this is an excellent waythe preferred practice to reward them for, and to motivate them toward, superior performance. Restricted stock is an important retention instrument in that it has immediate value to the recipient In 2018, 20,000 incentive stock option awards were granted to the Chief Retail Officer.

In the event of an involuntary termination of employment following a change in control, the unvested equity incentive awards held by each recipient will vest automatically.

2021 Long-Term Performance-Based Equity Compensation Plan. During 2021, our Compensation Committee implementedThe Company maintains a Long-Term Performance-Based Equity Compensation Plan, which provides Named Executive Officers of WaterStone Bank with annual awards of restricted stock. In order to become vested in their restricted stock, our executive officers will need to be employed throughout thea three-year performance period, of 2021 to 2023, which satisfies a retention goal, and the Company must meet certain pre-determined financial performance goals.  The Compensation Committee believes it is important for the restricted stock, which is intended to be a long-term incentive, to focus our executive officers on, and reward them for, the achievement of multi-year performance objectives.  The performance goals will be set at a target performance level.  If the Company meets the target performance level, the executive officers would be vested in the number of shares designated as the “target award.”  Performance levels would also be set at a maximum level to provide an incentive for superior performance, and at a threshold level, below which no shares would be earned.  Depending on the Company’s performance relative to the performance goals, the executive officers could earn between 0% and 150% of the target award. For the performance period of 2021 to 2023, our Compensation Committee will set the

Performance Measures

In designing the Long-Term Performance-Based Equity Plan, the Compensation Committee emphasized the Company’s goal of maintaining a high level of profitability as we strategically deploy our excess capital. The Compensation Committee determined that to encourage these goals, the Annual Incentive Plan would include the following performance measure:

Target Long-Term Performance-Based Equity Award Opportunity

Target equity awards are defined at the beginning of the year in consideration of, market data, each NEO’sNEOs total compensation package and the Company’s budgetary considerations. The following table sets forth information concerning Target Long-Term Performance-Based Equity Award opportunities for 2021:2023:

During 2021, our Compensation Committee awarded 7,132 shares of restricted stock to Mr. McGuiness. The shares had a grant-date fair value of $135,009. In accordance with the terms of his employment contract, the shares will vest on the third anniversary of the grant date.

During 2021,2023, our Compensation Committee awarded grants of 6,1458,192 shares of performance-based restricted stock to Mr. D. Gordon, 2,6393,628 shares to Mr. Bruss, 1,8072,486 shares to Mr. Gerke, and 1,6632,284 shares to Ms. Glynn.Glynn and 2,186 shares to Mr. R. Gordon. The number of shares granted is based upon the assumption of achievement at a “maximum” performance level. The actual number of shares that may ultimately vest for each NEO will be based upon achievement level relative to the Company’s return on average assets for the three-year performance period of 20212023 to 2023.2025. In addition, each NEO will need to be employed through the duration of that same three-year performance period. In the event of an involuntary termination of employment following a change in control, the unvested equity incentive awards held by each recipient will vest automatically.

Performance Results and Payouts – 2021 Long-Term Performance-Based Equity Compensation Plan

The Committee determines the final amount of each participant’s award based upon the attainment of the applicable performance goal. Actual performance was as follows:

Based upon the above financial performance measure, shares awarded under the 2021 Long-Term Performance-based Equity Compensation Plan were as follows relative to the target shares:

Bonus. During 2023, the Compensation Committee awarded a cash bonus of $62,000 to Mr. D. Gordon. By awarding the cash bonus, it was the intent of the Compensation Committee to recognize the leadership and efforts of Mr. Gordon during his 18 years of service to the Company.

Broad-Based Welfare and Retirement Benefit Plans. The purpose of welfare and retirement benefit plans are to ensure our compensation packages are competitive and to provide an opportunity for retirement savings. We maintain a number of broad-based welfare benefit plans that are available to our employees, including Named Executive Officers. We provide group medical, dental and vision insurance coverage plans to employees, with employees being responsible for a portion of the premiums.

We also offer our employees, including Named Executive Officers, participation in tax-qualified defined contribution retirement plans.

WaterStone Bank Employee Stock Ownership Plan (ESOP). The ESOP is a tax-qualified defined contribution retirement plan that benefits all eligible WaterStone Bank employees proportionately. The ESOP is not separately considered in the review and evaluation of annual executive compensation. ESOP allocations are made annually as of December 31 to all eligible WaterStone Bank employees. An employee must complete a full year of service and be employed by us on December 31 in order to receive an annual allocation each year. A trustee holds the shares purchased by the ESOP in an unallocated suspense account. Shares are released from the suspense account on a pro-rata basis as the ESOP repays the loan. The trustee allocates the shares released among participants on the basis of the participant’s proportional share of compensation relative to all participants. In the event of a plan termination, all allocated benefits become fully vested immediately, any outstanding loan will be repaid from shares in the unallocated suspense account and the amounts remaining in the suspense account will be allocated to participant accounts proportionally. Dividends paid with respect to shares of Waterstone Financial, Inc. stock in the unallocated suspense account may be used to repay the ESOP loan. To the extent the dividends exceeded the annual loan payment, the remaining dividend amount would cause additional shares to be allocated to participants or may be credited proportionately to participant accounts.

WaterStone Bank 401(k) Plan. WaterStone Bank maintains the WaterStone Bank 401(k) Plan, a tax-qualified defined contribution retirement plan, for all WaterStone Bank including Named Executive Officers,employees, who have satisfied the 401(k) Plan’s eligibility requirements.requirements, including Named Executive Officers. All eligible employees can begin participation in the 401(k) Plan on the first day of the month that coincides with or follows the date the employee attains age 18. A participant may contribute up to 90% of his or her compensation to the 401(k) Plan on a pre-tax basis, subject to the limitations imposed by the Internal Revenue Code. A participant is 100% vested in his or her salary deferral contributions. In addition to salary deferral contributions, the 401(k) Plan provides that WaterStone Bank will make matching contributions on 20% of the first 5% of the participant’s salarycompensation that is contributed to the 401(k) Plan.

Waterstone Mortgage 401(k) Plan. Waterstone Mortgage Corporation maintains the Waterstone Mortgage 401(k) Plan, a tax-qualified defined contribution retirement plan, for all Waterstone Mortgage Corporation employees, including Named Executive Officers, who have satisfied the 401(k) Plan’s eligibility requirements. All eligible employees can begin participation in the 401(k) Plan on the first day of the month that coincides with or follows the date the employee attains age 21 and completes 60 days of service. A participant may contribute up to 100% of his or her eligible compensation to the 401(k) Plan on a pre-tax basis, subject to the limitations imposed by the Internal Revenue Code. A participant is 100% vested in his or her salary deferral contributions. In addition to salary deferral contributions, the 401(k) Plan provides that Waterstone Mortgage Corporation will make matching contributions on 50% of the first 6% of the participant’s salarycompensation that is contributed to the 401(k) Plan.

Perquisites. Perquisites comprise a small portion of our total compensation package. The main perquisites we provide are use of a company-owned vehicle or an automobile allowance for selected officers. Although these perquisites may involve personal use, we believe that they are reasonable and consistent with the overall compensation program to assist with attracting and retaining executive officers.

Executive Agreements. WaterStone Bank has entered into executive employment agreements with each of Messrs. D Gordon and McGuiness. For descriptions of the executive employment agreements, see the “Employment Agreements” section following the “Summary Compensation Table.”

Compensation Committee Report

The Compensation Committee has reviewed and discussed the section of this Proxy Statement entitled “Compensation Discussion and Analysis” with management. Based on this review and discussion, the Compensation Committee recommended to the board of directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement.

Compensation Committee:

Thomas E. Dalum, Chairman

Ellen S. Bartel

Patrick S. Lawton (Chair)

Stephen J. Schmidt

Derek L. Tyus

PROPOSAL 3 – ADVISORY VOTE ON EXECUTIVE COMPENSATION

The compensation of our principal executive officer, principal financial officer and the threefour other most highly compensated executive officers of the Company (“Named Executive Officers”) is described above in general and is shown in detail in the Executive Compensation and Compensation Discussion and Analysis sections. Shareholders are urged to read the Executive Compensation and Compensation Discussion and Analysis sections of this Proxy Statement, which discusses our compensation policies and procedures with respect to our Named Executive Officers.

In accordance with Section 14A of the Exchange Act, shareholders will be asked at the Annual Meeting to provide their support with respect to the compensation of our Named Executive Officers by voting on the following advisory, non-binding resolution:

RESOLVED, that the compensation paid to the “Named Executive Officers,” as disclosed in the Company’s Proxy Statement for the 20212023 Annual Meeting of Shareholders pursuant to Item 402 Securities and Exchange Commission Regulation S-K, including the Compensation Discussion and Analysis, the 20212023 compensation tables and narrative discussion is hereby approved.

We will hold annual say-on-pay votes until the next shareholders vote regarding the frequency of say-on-pay votes, which we expect to occur at the 2026 annual meeting of shareholders.

This advisory vote, commonly referred to as a “say-on-pay” advisory vote, is non-binding on the board of directors. Although non-binding, the board of directors and the Compensation Committee value constructive dialogue on executive compensation and other important governance topics with our shareholders and encourage all shareholders to vote their shares on this matter. The board of directors and the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding our executive compensation.

Unless otherwise instructed, validly executed proxies will be voted “FOR” this resolution.

The board of directors unanimously recommends that you vote “FOR” the resolution set forth in Proposal 3.

EXECUTIVE COMPENSATION

Summary Compensation Table. The following table shows the compensation of our Named Executive Officers, including Douglas S. Gordon, our principal executive officer, Mark R. Gerke, our principal financial officer, and the threefour other highest paid executive officers who received total compensation of more than $100,000 during the year ended December 31, 2021.2023. The “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column hasand “Options Awards” columns have been omitted because no listed individual earnedsince a Named Executive Officer did not earn any compensation during the listed years of a type required to be disclosed in this column.column during the years listed.

All Other Compensation

Realized Compensation

To supplement the SEC required disclosure in the above Summary Compensation Table, the following additional table has been included to show the total compensation realized by each Named Executive Officer in each of the years shown. The Summary Compensation Table, as calculated under the SEC rules, includes items that are impacted by accounting assumptions and also may include amounts that are not ultimately realized, and therefore that table may not necessarily be reflective of realized compensation in a particular year. Accordingly, the Company believes that this table is useful to shareholders.

The table below shows compensation realized by each Named Executive Officer. For purposes of this presentation, realized compensation includes, base salary, performance-based cash bonus and all other compensation, all of which are included in the SEC required disclosure in the above Summary Compensation Table. To approximate an amount that represents realized compensation, the following table also includes an amount that represents the value realized upon the vesting of restricted stock awards and omits the grant date fair value of stock or option awards that have not vested.