9)	Regulatory Capital

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements, or overall financial performance deemed by the regulators to be inadequate, can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Company's and Bank’s assets, liabilities, and certain off-balance-sheet items, as calculated under regulatory accounting practices. The Company's and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The Federal Reserve Board and the FDIC issued final rules implementing the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act changes. The rules revise minimum capital requirements and adjust prompt corrective action thresholds. The final rules revised the regulatory capital elements, added a new common equity Tier I capital ratio, increased the minimum Tier 1 capital ratio requirements and implemented a new capital conservation buffer. The rules also permitted certain banking organizations to retain, through a one-time election, the existing treatment for accumulated other comprehensive income. The Company and the Bank have made the election to retain the existing treatment for accumulated other comprehensive income. The final rules took effect for the Company and the Bank on January 1, 2015, subject to a transition period for certain parts of the rules.

In addition, as a result of the legislation, the federal banking agencies are required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. On September 17, 2019, the Board of the Federal Deposit Insurance Corporation passed a final rule on the community bank leverage ratio, setting the minimum required community bank leverage ratio at 9%. In addition, the Federal Reserve Board was required to raise the asset threshold under its Small Bank Holding Company Policy Statement from $1 billion to $3 billion for bank or savings and loan holding companies that are exempt from consolidated capital requirements, provided that such companies meet certain other conditions such as not engaging in significant non-banking activities. The rule went into effect on January 1, 2020. A financial institution can elect to be subject to this new definition.

The table below includes the regulatory capital ratio requirements that became effective on January 1, 2015. Beginning in 2016, an additional capital conservation buffer was added to the minimum requirements for capital adequacy purposes, subject to a three year phase-in period. The capital conservation buffer was fully phased-in as of January 1, 2019 at 2.5%. A banking organization with a conservation buffer of less than 2.5% will be subject to limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. At December 31, 2019, the ratios for the Company and the Bank are sufficient to meet the fully phased-in conservation buffer.

The actual and required capital amounts and ratios as of December 31, 2019 and 2018 are presented in the table below:

				December 31, 2019
	Actual						For Capital Adequacy Purposes					Minimum Capital Adequacy with Capital Buffer					To Be Well-Capitalized Under Prompt Corrective Action Provisions
	Amount			Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
		(Dollars In Thousands)

Total capital (to risk-weighted assets)
Consolidated Waterstone Financial , Inc.		$	404,748		26.17	%		123,731		8.00	%		162,398		10.500	%		N/A		N/A
WaterStone Bank			353,357		22.85	%		123,716		8.00	%		162,378		10.500	%		154,646		10.00	%
Tier I capital (to risk-weighted assets)
Consolidated Waterstone Financial , Inc.			392,361		25.37	%		92,799		6.00	%		131,465		8.500	%		N/A		N/A
WaterStone Bank			340,970		22.05	%		92,787		6.00	%		131,449		8.500	%		123,716		8.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)
Consolidated Waterstone Financial , Inc.			392,361		25.37	%		69,599		4.50	%		108,265		7.000	%		N/A		N/A
WaterStone Bank			340,970		22.05	%		69,590		4.50	%		108,252		7.000	%		100,520		6.50	%
Tier I capital (to average assets)
Consolidated Waterstone Financial , Inc.			392,361		19.69	%		79,691		4.00	%		N/A		N/A			N/A		N/A
WaterStone Bank			340,970		17.11	%		79,691		4.00	%		N/A		N/A			99,614		5.00	%
State of Wisconsin (to total assets)
WaterStone Bank			340,970		17.11	%		119,590		6.00	%		N/A		N/A			N/A		N/A

	December 31, 2018
	(Dollars In Thousands)

Total capital (to risk-weighted assets)
Consolidated Waterstone Financial , Inc.		$	414,566		28.22	%		117,506		8.00	%		145,046		9.88	%		N/A		N/A
WaterStone Bank			395,783		26.95	%		117,490		8.00	%		145,027		9.88	%		146,863		10.00	%
Tier I capital (to risk-weighted assets)
Consolidated Waterstone Financial , Inc.			401,317		27.32	%		88,130		6.00	%		115,670		7.88	%		N/A		N/A
WaterStone Bank			382,534		26.05	%		88,118		6.00	%		115,655		7.88	%		117,490		8.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)
Consolidated Waterstone Financial , Inc.			401,317		27.32	%		66,097		4.50	%		93,638		6.38	%		N/A		N/A
WaterStone Bank			382,534		26.05	%		66,088		4.50	%		93,625		6.38	%		95,461		6.50	%
Tier I capital (to average assets)
Consolidated Waterstone Financial , Inc.			401,317		21.06	%		76,214		4.00	%		N/A		N/A			N/A		N/A
WaterStone Bank			382,534		20.08	%		76,214		4.00	%		N/A		N/A			95,268		5.00	%
State of Wisconsin (to total assets)
WaterStone Bank			382,534		20.01	%		114,712		6.00	%		N/A		N/A			N/A		N/A