Waterstone Financial Inc

This management-sponsored, non-binding proposal asks shareholders to approve, on an advisory basis, the compensation paid to the company’s Named Executive Officers as disclosed in the proxy materials (including the Compensation Discussion and Analysis and compensation tables). Management is seeking shareholder approval to validate its pay practices and to demonstrate shareholder support for the design and implementation of compensation programs that it says align with company strategy and long‑term shareholder value. The Compensation Committee frames executive pay around base salary, annual cash incentives tied to budgeted financial metrics, and long‑term performance-based restricted stock tied to multi-year return on average assets, plus standard benefits and clawback and ownership guidelines designed to align executives with shareholders. The vote is non-binding but informative: the board and Compensation Committee state they will review and consider the voting outcome when setting future pay, so a negative outcome could trigger policy or disclosure changes. Key governance context: Waterstone holds annual say-on-pay votes and is concurrently asking shareholders about the frequency of future say-on-pay votes; the board previously received >92% support in 2025. The board recommends a FOR vote, arguing that compensation is evaluated and approved annually and that the company’s practices follow market benchmarking, use independent advisors, maintain stock ownership guidelines and include clawback policies. From an investor perspective, the proposal provides a direct signal of shareholder satisfaction with pay alignment, risk controls, and incentive metrics — a strong FOR vote supports continuation of current programs; a significant AGAINST would likely prompt engagement and potential compensation changes. Given the company’s small-cap community-bank profile and pay-for-performance structures, analysts will weigh the company’s historical pay outcomes, the disclosed performance metrics (e.g., return on average assets, deposit and loan growth measures), and the Compensation Committee’s responsiveness to past shareholder feedback when assessing the implications of the vote.

This management-proposed, non-binding item asks shareholders to indicate their preferred frequency for future advisory votes on executive compensation — one year, two years or three years — with the board recommending an annual vote. The proposal does not change compensation itself; rather it sets how often shareholders will express an advisory opinion on pay. Management’s stated rationale is that compensation decisions and adjustments are made annually by the Compensation Committee and board, so annual feedback is most timely and relevant; accordingly, proxies will be voted for the One Year option unless instructed otherwise. The mechanics: because the vote is advisory, if no option receives a majority the option receiving the greatest number of votes will be treated as the frequency recommended by shareholders; the board is not bound by the outcome but will consider the results in its governance process. For governance analysts, the frequency choice affects the cadence of shareholder engagement on pay — annual votes allow more frequent signaling and more immediate corrective feedback, while multi-year votes reduce administrative burden and can stabilize compensation programs. The company’s prior voting history (annual say-on-pay votes and >92% support in 2025) and the Compensation Committee’s annual review practices explain the board’s preference for yearly votes. A plurality or majority for a non-annual frequency could indicate shareholder preference for less frequent engagement on pay and might influence the board’s shareholder outreach and disclosure timeline.