Waterstone Financial, Inc. Announces Results of Operations for the Quarter and Six Months Ended June 30, 2019


WAUWATOSA, Wisc., July 24, 2019 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $9.6 million, or $0.37 per diluted share for the quarter ended June 30, 2019 compared to $9.4 million, or $0.34 per diluted share for the quarter ended June 30, 2018. Net income per diluted share was $0.61 for the six months ended June 30, 2019 compared to net income per diluted share of $0.59 for the six months ended June 30, 2018.

“We achieved a record second quarter net income of $9.6 million and diluted earnings per share of $0.37,” said Douglas Gordon, CEO of Waterstone Financial, Inc. “The Community Banking segment continues to focus on organic growth, maintaining strong asset quality and making strategic investments for the future. The Mortgage Banking segment executed well in the second quarter including originating its highest loan volume for a month of May. As a result of our continued strong performance and well capitalized position, we were able to enter into a new share repurchase program during the quarter and continue declaring a quarterly dividend showing our commitment to increasing shareholder value.”

Highlights of the Quarter Ended June 30, 2019

Waterstone Financial, Inc. (Consolidated)

  • Consolidated net income of Waterstone Financial, Inc. totaled $9.6 million for the quarter ended June 30, 2019, compared to $9.4 million for the quarter ended June 30, 2018.
  • Consolidated return on average assets was 1.95% for the quarter ended June 30, 2019 compared to 2.02% for the quarter ended June 30, 2018.
  • Consolidated return on average equity was 9.96% for the quarter ended June 30, 2019 and 9.40% for the quarter ended June 30, 2018.  
  • The Company repurchased a total 384,500 shares on the open market during the quarter ended June 30, 2019 at an average price of $16.74 per share for a total of 846,900 shares at an average price of $16.62 per share during the six months ended June 30, 2019.
  • Dividends declared totaled $0.12 per share during the quarter ended June 30, 2019 amounting to a total of $0.74 in dividends declared per share during the six months ended June 30, 2019.

Community Banking Segment

  • Pre-tax income of the segment totaled $7.4 million for the quarter ended June 30, 2019, which represents a 13.7% decrease compared to $8.5 million for the quarter ended June 30, 2018.
  • Net interest income of the segment totaled $13.5 million for the quarter ended June 30, 2019, which represents a 1.6% decrease compared to $13.7 million for the quarter ended June 30, 2018.
  • Average loans held for investment totaled $1.38 billion during the quarter ended June 30, 2019, which represents an increase of $47.3 million, or 3.6% over the comparable quarter in the prior year. Average loans held for investment decreased $228,000, or 0.1% annualized, compared to $1.38 billion for the quarter ended March 31, 2019.
  • Net interest margin decreased 32 basis points to 2.82% for the quarter ended June 30, 2019 compared to 3.14% for the quarter ended June 30, 2018, which was a result of the increase in cost of funding as certificates of deposit and borrowings repriced at higher rates over the past year. Net interest margin decreased nine basis points compared to 2.93% for the quarter ended March 31, 2019.
  • The segment had no provision for loan losses for the quarter ended June 30, 2019 compared to a negative provision for loan loss of $250,000 for the quarter ended June 30, 2018. Net recoveries totaled $26,000 for the quarter ended June 30, 2019, compared to net recoveries of $154,000 for the quarter ended June 30, 2018.
  • Noninterest income decreased $58,000 for the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018 as fees earned on loans decreased.
  • Noninterest expenses increased $647,000 for the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018 as compensation, occupancy, data processing, and real estate owned increased.
  • The efficiency ratio for the community banking segment totaled 49.52% for the quarter ended June 30, 2019, compared to 44.26% for the quarter ended June 30, 2018.
  • Average deposits totaled $1.04 billion during the quarter ended June 30, 2019, which represents an increase of $50.7 million, or 5.1%, over the comparable quarter in the prior year.  Average deposits increased $4.3 million, or 1.6% annualized, compared to the quarter ended March 31, 2019.
  • Nonperforming assets as percentage of total assets was 0.37% at June 30, 2019, 0.44% at March 31, 2019, and 0.45% at June 30, 2018.
  • Past due loans as percentage of total loans was 0.61% at June 30, 2019, 0.46% at March 31, 2019, and 0.54% at June 30, 2018.

Mortgage Banking Segment

  • The Mortgage Banking segment totaled a pre-tax income of $5.4 million for the quarter ended June 30, 2019, compared to $4.0 million of pre-tax income for the quarter ended June 30, 2018.
  • Loan originations increased approximately $72.1 million to $793.3 million during the quarter ended June 30, 2019, compared to $721.2 million during the quarter ended June 30, 2018.  Origination volume relative to purchase activity accounted for 87.6% of originations for the
  • quarter ended June 30, 2019 compared to 92.6% of total originations for the quarter ended June 30, 2018.
  • Mortgage banking income increased $1.8 million, or 5.6%, to $34.4 million for the quarter ended June 30, 2019, compared to $32.5 million for the quarter ended June 30, 2018.
  • Gross margin on loans sold decreased 4.7% to 4.29% for the quarter ended June 30, 2019, compared to 4.50% for the quarter ended June 30, 2018. 

About Waterstone Financial, Inc.

Waterstone Financial, Inc. is the savings and loan holding company for WaterStone Bank. WaterStone Bank was established in 1921 and offers a full suite of personal and business banking products. The Bank has branches in Wauwatosa, Brookfield, Fox Point/North Shore, Franklin/Hales Corners, Germantown/Menomonee Falls, Greenfield, Oak Creek, Oconomowoc/Lake Country, Pewaukee, Waukesha/Brookfield, and West Allis, Wisconsin and a commercial lending office in Minneapolis, Minnesota. WaterStone Bank is the parent company to Waterstone Mortgage, which has the ability to lend in 47 states. For more information about WaterStone Bank, go to http://www.wsbonline.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements include, without limitation, statements regarding expected financial and operating activities and results that are preceded by, followed by, or that include words such as “may,” “expects,” “anticipates,” “estimates” or “believes.”  Such statements are subject to important factors that could cause actual results to differ materially from those anticipated by the forward-looking statements.  These factors include (i) exposure to the deterioration in the commercial and residential real estate markets which could result in increased charge-offs and increases in the allowance for loan losses,  (ii) various other factors, including changes in economic conditions affecting borrowers, new information regarding outstanding loans and identification of additional problem loans, which could require an increase in the allowance for loan losses, (iii) Waterstone’s ability to maintain required levels of capital and other current and future regulatory requirements, (iv) the impact of recent and future legislative initiatives on the financial markets, and (v) those factors referenced in Item 1A. Risk Factors in Waterstone’s most recent Annual Report on Form 10-K and as may be described from time to time in Waterstone’s subsequent SEC filings, which factors are incorporated herein by reference.  Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect only Waterstone’s belief as of the date of this press release.

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
  For The Three Months Ended June 30,For The Six Months Ended June 30,
  2019201820192018
  (In Thousands, except per share amounts)
Interest income:     
Loans$ 18,026  16,700  35,130  32,158
Mortgage-related securities  764  644  1,523  1,282
Debt securities, federal funds sold and short-term investments  1,123  1,019  2,432  1,886
Total interest income  19,913  18,363  39,085  35,326
Interest expense:     
Deposits  4,344  2,710  8,334  5,024
Borrowings  2,588  1,933  4,834  3,441
Total interest expense  6,932  4,643  13,168  8,465
Net interest income  12,981  13,720  25,917  26,861
Provision for loan losses  30  (220) (650) (1,100)
Net interest income after provision for loan losses  12,951  13,940  26,567  27,961
Noninterest income:     
Service charges on loans and deposits  390  491  769  890
Increase in cash surrender value of life insurance  507  473  851  801
Mortgage banking income  34,105  32,090  57,464  56,277
Other  188  264  363  533
Total noninterest income  35,190  33,318  59,447  58,501
Noninterest expenses:     
Compensation, payroll taxes, and other employee benefits  27,074  26,234  47,713  47,217
Occupancy, office furniture, and equipment  2,680  2,605  5,456  5,244
Advertising  963  1,000  1,921  1,860
Data processing  869  623  1,638  1,248
Communications  353  435  681  817
Professional fees  789  647  1,484  1,347
Real estate owned  19  (126) 51  191
Loan processing expense  879  904  1,684  1,892
Other  1,729  2,415  4,076  5,068
Total noninterest expenses  35,355  34,737  64,704  64,884
Income before income taxes  12,786  12,521  21,310  21,578
Income tax expense   3,143  3,101  5,125  5,205
Net income $ 9,643  9,420  16,185  16,373
Income per share:     
Basic$0.370.340.610.60
Diluted$0.370.340.610.59
Weighted average shares outstanding:     
Basic 26,242 27,504 26,370 27,506
Diluted 26,412 27,742 26,572 27,790
      
      
      


WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 June 30,December 31,
 20192018
 (Unaudited) 
Assets(In Thousands, except per share amounts)
Cash$ 47,253 $ 48,234
Federal funds sold 13,339  25,100
Interest-earning deposits in other financial institutions and other short term investments 9,553  12,767
Cash and cash equivalents 70,145  86,101
Securities available for sale (at fair value) 182,862  185,720
Loans held for sale (at fair value) 244,052  141,616
Loans receivable 1,370,727  1,379,148
Less: Allowance for loan losses 12,617  13,249
Loans receivable, net 1,358,110  1,365,899
   
Office properties and equipment, net 24,978  24,524
Federal Home Loan Bank stock (at cost) 22,275  19,350
Cash surrender value of life insurance 68,581  67,550
Real estate owned, net 1,684  2,152
Prepaid expenses and other assets 42,451  22,469
Total assets$ 2,015,138 $ 1,915,381
   
Liabilities and Shareholders' Equity  
Liabilities:  
Demand deposits$ 127,123 $ 139,111
Money market and savings deposits 182,222  163,511
Time deposits 745,651  735,873
Total deposits 1,054,996  1,038,495
   
Borrowings 518,681  435,046
Advance payments by borrowers for taxes 18,852  4,371
Other liabilities 35,806  37,790
Total liabilities 1,628,335  1,515,702
   
Shareholders' equity:  
Preferred stock -  -
Common stock 276  285
Additional paid-in capital 331,600  330,327
Retained earnings 183,820  187,153
Unearned ESOP shares (17,210) (17,804)
Accumulated other comprehensive loss, net of taxes 655  (2,361)
Cost of shares repurchased (112,338) (97,921)
Total shareholders' equity 386,803  399,679
Total liabilities and shareholders' equity$ 2,015,138 $ 1,915,381
   
Share Information   
Shares outstanding 27,626  28,463
Book value per share$ 14.00 $ 14.04
Closing market price$ 17.06 $ 16.76
Price to book ratio121.86%119.37%


WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
      
 At or For the Three Months Ended
 June 30,March 31,December 31,September 30,June 30,
 20192019201820182018
 (Dollars in Thousands, except per share amounts)
Condensed Results of Operations:     
Net interest income$ 12,981  12,936  13,466  13,850  13,720
Provision for loan losses 30  (680) -   40  (220)
Total noninterest income 35,190  24,257  25,636  34,062  33,318
Total noninterest expense 35,355  29,349  31,846  36,426  34,737
Income before income taxes 12,786  8,524  7,256  11,446  12,521
Income tax expense 3,143  1,982  1,578  2,743  3,101
Net income$ 9,643  6,542  5,678  8,703  9,420
Income per share – basic$ 0.37  0.25  0.21  0.32  0.34
Income per share – diluted $ 0.37  0.24  0.21  0.31  0.34
Dividends declared per share$ 0.12  0.62  0.12  0.12  0.12
      
Performance Ratios (annualized):     
Return on average assets - QTD1.95%1.39%1.18%1.80%2.02%
Return on average equity - QTD9.96%6.65%5.58%8.48%9.40%
Net interest margin - QTD2.82%2.93%2.99%3.07%3.14%
      
Return on average assets - YTD1.67%1.39%1.64%1.80%1.80%
Return on average equity - YTD8.28%6.65%7.60%8.25%8.13%
Net interest margin - YTD2.88%2.93%3.09%3.13%3.16%
      
Asset Quality Ratios:     
Past due loans to total loans0.61%0.46%0.50%0.67%0.54%
Nonaccrual loans to total loans0.41%0.49%0.48%0.48%0.46%
Nonperforming assets to total assets0.37%0.44%0.45%0.45%0.45%
      


WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF QUARTERLY AVERAGE BALANCES AND YIELD/COSTS
(Unaudited)
      
 At or For the Three Months Ended
 June 30,March 31,December 31,September 30,June 30,
 20192019201820182018
Average balances(Dollars in Thousands)
Interest-earning assets     
Loans receivable and held for sale 1,552,199  1,477,991  1,496,125  1,507,632  1,451,507
Mortgage related securities 114,537  115,674  111,004  106,047  109,879
Debt securities, federal funds sold and short term investments 180,111  194,669  179,232  176,733  192,422
  Total interest-earning assets 1,846,847  1,788,334  1,786,361  1,790,412  1,753,808
Noninterest-earning assets 136,263  125,396  119,715  122,575  119,291
  Total assets 1,983,110  1,913,730  1,906,076  1,912,987  1,873,099
      
Interest-bearing liabilities     
Demand accounts 35,744  36,268  36,941  37,936  37,291
Money market and savings accounts 193,542  176,237  184,873  185,864  166,587
Certificates of deposit 736,798  735,471  722,774  707,970  707,758
  Total interest-bearing deposits 966,084  947,976  944,588  931,770  911,636
Borrowings 504,940  438,905  439,601  444,570  445,064
  Total interest-bearing liabilities 1,471,024  1,386,881  1,384,189  1,376,340  1,356,700
Noninterest-bearing demand deposits 91,545  97,951  97,677  100,804  96,108
Noninterest-bearing liabilities 32,143  30,027  20,219  28,632  18,266
  Total liabilities 1,594,712  1,514,859  1,502,085  1,505,776  1,471,074
Equity 388,398  398,871  403,991  407,211  402,025
  Total liabilities and equity 1,983,110  1,913,730  1,906,076  1,912,987  1,873,099
      
Average Yield/Costs (annualized)     
Loans receivable and held for sale4.66%4.69%4.63%4.56%4.61%
Mortgage related securities2.68%2.66%2.58%2.41%2.35%
Debt securities, federal funds sold and short term investments2.50%2.73%2.52%2.39%2.12%
  Total interest-earning assets4.32%4.35%4.29%4.22%4.20%
      
Demand accounts0.09%0.09%0.09%0.10%0.09%
Money market and savings accounts0.66%0.63%0.47%0.35%0.30%
Certificates of deposit2.19%2.04%1.82%1.62%1.46%
  Total interest-bearing deposits1.80%1.71%1.49%1.30%1.19%
Borrowings2.06%2.08%2.10%1.90%1.74%
  Total interest-bearing liabilities1.89%1.82%1.68%1.50%1.37%
      


COMMUNITY BANKING SEGMENT
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
       
  At or For the Three Months Ended
  June 30,March 31,December 31,September 30,June 30,
  20192019201820182018
  (Dollars in Thousands)
Condensed Results of Operations:      
Net interest income$ 13,530  13,132  13,774  14,121  13,747
Provision for loan losses  -  (700) -  -  (250)
Total noninterest income  1,079  881  911  1,312  1,137
Noninterest expenses:      
Compensation, payroll taxes, and other employee benefits  4,671  4,756  4,761  4,435  4,301
Occupancy, office furniture and equipment  944  972  842  826  813
Advertising  220  181  185  183  241
Data processing  493  457  422  414  400
Communications  93  82  92  112  121
Professional fees  160  268  339  257  180
Real estate owned  19  32  (62) (128) (126)
Loan processing expense  -  -  -  -  -
Other 635 489 571 701 658
Total noninterest expense 7,235 7,237 7,150 6,800 6,588
Income before income taxes 7,374 7,476 7,535 8,633 8,546
Income tax expense 1,594 1,687 1,632 2,003 1,970
Net income$5,780 5,789 5,903 6,630 6,576
       
Efficiency ratio - QTD 49.52%51.64%48.69%44.06%44.26%
Efficiency ratio - YTD 50.56%51.64%47.63%47.28%48.99%
       


MORTGAGE BANKING SEGMENT
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
      
 At or For the Three Months Ended
 June 30,March 31,December 31,September 30,June 30,
 20192019201820182018
 (Dollars in Thousands)
Condensed Results of Operations:     
Net interest income$ (529) (208) (332) (286) (40)
Provision for loan losses 30  20  -   40  30
Total noninterest income 34,364  23,571  24,986  33,165  32,547
Noninterest expenses:     
Compensation, payroll taxes, and other employee benefits 22,579  16,060  18,499  23,164  22,078
Occupancy, office furniture and equipment 1,736  1,804  2,018  1,925  1,792
Advertising 743  777  854  1,041  759
Data processing 372  308  309  386  224
Communications 260  246  290  300  314
Professional fees 620  426  52  319  458
Real estate owned -   -   -   -   - 
Loan processing expense 879  805  643  837  904
Other 1,186  1,912  2,297  2,064  1,964
Total noninterest expense 28,375  22,338  24,962  30,036  28,493
Income before income taxes 5,430  1,005  (308) 2,803  3,984
Income tax expense 1,545  286  (62) 737  1,133
Net income$ 3,885  719  (246) 2,066  2,851
      
Efficiency ratio - QTD83.86%95.61%101.25%91.35%87.65%
Efficiency ratio - YTD88.66%95.61%92.89%90.60%90.16%
      
Loan Originations$ 793,254  501,432  600,156  761,206  721,184
Purchase 87.6%89.9%91.1%92.1%92.6%
Refinance12.4%10.1%8.9%7.9%7.4%
Gross margin on loans sold(1)4.29%4.57%4.17%4.39%4.50%
(1) - Gross margin on loans sold equals mortgage banking income (excluding the change in interest rate lock value) divided by total loan originations
      

Contact: Mark R. Gerke
Chief Financial Officer
414.459.4012
markgerke@wsbonline.com