Waterstone Financial, Inc. Announces Results of Operations for the Quarter and Six Months Ended June 30, 2021

Wauwatosa, Wisconsin, UNITED STATES


WAUWATOSA, Wis., July 20, 2021 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $17.9 million, or $0.74 per diluted share for the quarter ended June 30, 2021 compared to $20.9 million, or $0.85 per diluted share for the quarter ended June 30, 2020. Net income per diluted share was $1.64 for the six months ended June 30, 2021 compared to net income per diluted share of $1.08 for the six months ended June 30, 2020.

“Our Company’s strong performance continued during the second quarter and we were excited to declare and pay a $0.50 special dividend during the quarter,” said Douglas Gordon, Chief Executive Officer of Waterstone Financial, Inc. “Our business model has allowed us to maximize the opportunity presented by the current market, return capital to our shareholders and continue to enhance our book value.”

Highlights of the Quarter Ended June 30, 2021

Waterstone Financial, Inc. (Consolidated)

  • Consolidated net income of Waterstone Financial, Inc. totaled $17.9 million for the quarter ended June 30, 2021, compared to $20.9 million for the quarter ended June 30, 2020.
  • Consolidated return on average assets was 3.25% for the quarter ended June 30, 2021 compared to 3.87% for the quarter ended June 30, 2020.
  • Consolidated return on average equity was 16.49% for the quarter ended June 30, 2021 and 22.39% for the quarter ended June 30, 2020.
  • Dividends declared during the quarter ended June 30, 2021 totaled $0.70 per common share, which included a quarterly dividend of $0.20 per share and a special dividend of $0.50 per share.
  • We repurchased approximately 59,000 shares at a cost of $1.1 million during the quarter ended June 30, 2021.

Community Banking Segment

  • Pre-tax income totaled $9.7 million for the quarter ended June 30, 2021, which represents a 106.4% increase compared to $4.7 million for the quarter ended June 30, 2020.
  • Net interest income totaled $14.5 million for the quarter ended June 30, 2021, which represents a 6.0% increase compared to $13.7 million for the quarter ended June 30, 2020.
  • Average loans held for investment totaled $1.32 billion during the quarter ended June 30, 2021, which represents a decrease of $101.6 million, or 7.2%, compared to $1.42 billion for the quarter ended June 30, 2020. Average loans held for investment decreased $27.7 million compared to $1.35 billion for the quarter ended March 31, 2021 as residential real estate loans continue to prepay at an accelerated rate.
  • Net interest margin increased 16 basis points to 2.78% for the quarter ended June 30, 2021 compared to 2.62% for the quarter ended June 30, 2020, which was a result of lower average rates on deposits, as certificate of deposits repriced at lower rates. Net interest margin decreased two basis points compared to 2.80% for the quarter ended March 31, 2021, driven by a decrease in PPP loan fees as the first round loan payoffs decreased.
  • The segment had a negative provision for loan losses of $750,000 for the quarter ended June 30, 2021 compared to a $4.3 million provision for loan losses for the quarter ended June 30, 2020. Net recoveries totaled $378,000 for the quarter ended June 30, 2021 as one significant loan recovery payment was made in the quarter, compared to net recoveries of $8,000 for the quarter ended June 30, 2020.  
  • Noninterest income decreased $1.3 million for the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020, due primarily to decreases on service charges on loans from fees earned on swaps.
  • Noninterest expense decreased $397,000 for the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020. Compensation, payroll taxes and other employee benefits expense decreased $32,000 primarily due to a decrease in variable compensation offset by increases in health insurance and employee stock ownership plan expenses. Data processing expense decreased $212,000 due to the implementation of a new digital banking platform in 2020. Other noninterest expense decreased $71,000 as certain loan-related expenses decreased offset by a decrease of credits received for FDIC premiums in 2020 but not in 2021.
  • The efficiency ratio was 44.79% for the quarter ended June 30, 2021, compared to 45.86% for the quarter ended June 30, 2020.
  • Average deposits (excluding escrow accounts) totaled $1.23 billion during the quarter ended June 30, 2021, an increase of $103.4 million, or 9.2%, compared to $1.13 billion during the quarter ended June 30, 2020. Average deposits increased $24.8 million, or 8.2% annualized compared to the $1.21 billion for the quarter ended March 31, 2021.
  • Nonperforming assets as percentage of total assets was 0.20% at June 30, 2021, 0.20% at March 31, 2021, and 0.28% at June 30, 2020.
  • Past due loans as percentage of total loans was 0.53% at June 30, 2021, 0.52% at March 31, 2021, and 0.45% at June 30, 2020.
  • PPP loans totaled $16.9 million as of June 30, 2021. The average balance for the quarter ended June 30, 2021 was $19.5 million. For the quarter ended June 30, 2021, PPP loan interest income recognized was approximately $49,000 and the amortization of fee income was approximately $286,000. Net interest margin, excluding the impact of the PPP loans, was 2.74%. Net interest margin for the quarter ended June 30, 2021, including the impact of the PPP loans, was 2.78%.
  • The Company held approximately $3.5 million in loans, representing 0.3% of the total loan portfolio as of June 30, 2021, which had been modified as either a deferment of principal or principal and interest since the beginning of the pandemic. Of the $3.5 million in loans, $559,000 qualify as modifications under the Coronavirus Aid, Relief and Economic Security (“CARES Act”). The remaining $2.9 million is composed of three loan relationships that are classified as troubled debt restructurings.

Mortgage Banking Segment

  • Pre-tax income totaled $14.2 million for the quarter ended June 30, 2021, compared to $23.2 million for the quarter ended June 30, 2020.
  • Loan originations decreased $77.5 million, or 6.8%, to $1.07 billion during the quarter ended June 30, 2021, compared to $1.14 billion during the quarter ended June 30, 2020. Origination volume relative to purchase activity accounted for 75.4% of originations for the quarter ended June 30, 2021 compared to 55.5% of total originations for the quarter ended June 30, 2020.
  • Mortgage banking non-interest income decreased $13.7 million, or 21.3%, to $50.6 million for the quarter ended June 30, 2021, compared to $64.2 million for the quarter ended June 30, 2020.
  • Gross margin on loans sold decreased to 4.81% for the quarter ended June 30, 2021, compared to 5.45% for the quarter ended June 30, 2020.
  • Total compensation, payroll taxes and other employee benefits decreased $3.0 million, or 9.2%, to $29.2 million during the quarter ended June 30, 2021 compared to $32.1 million during the quarter ended June 30, 2020. The decrease primarily related to decreased commission expense and branch manager compensation driven by decreased loan origination volume and branch profitability as gross margins decreased.
  • Professional fees decreased $489,000 to $361,000 during the quarter ended June 30, 2021 compared to $850,000 of expense during the quarter ended June 30, 2020. The decrease related to a decrease in litigation costs compared to the prior year, as the Herrington settlement was resolved in 2020.
  • Other noninterest expense decreased $561,000 to $2.7 million during the quarter ended June 30, 2021 compared to $3.2 million during the quarter ended June 30, 2020. The decrease related to a decrease in the provision for losses on loans sold to the secondary market that results from both early payoff and early default provisions with investors. The decreased provision is driven by both an decrease in the number and volume of loans sold, as well as actual default activity resulting from COVID-19 pandemic was lower than expected.

Recent Developments:

COVID-19 Pandemic and the CARES Act

The CARES Act, signed into law at the end of March 2020, allowed for a temporary delay in the adoption of accounting guidance under Accounting Standards Codification Topic 326, “Financial Instruments – Credit Losses (“CECL”) until the earlier of December 31, 2020 or the 60th day after the end of the COVID-19 national emergency. During the quarter ended March 31, 2020, pursuant to the CARES Act and guidance from the Securities and Exchange Commission (“SEC”) and Financial Accounting Standards Board (“FASB”), we elected to delay adoption of CECL.  On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law. Among other provisions, this Act extended the temporary delay on the adoption of CECL until January 1, 2022. We have elected to continue to delay adoption of CECL. As a result, our financial statements for the quarter and year ended June 30, 2021 include an allowance for loan losses that was prepared under the existing incurred loss methodology.

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/State St, Brookfield, Fox Point/North Shore, Franklin/Hales Corners, Germantown/Menomonee Falls, Greenfield/Loomis Rd, Milwaukee/Oklahoma Ave, Oak Creek/27th St, Oak Creek/Howell Ave, Oconomowoc/Lake Country, Pewaukee, Waukesha, West Allis/Greenfield Ave, and West Allis/National Ave, Wisconsin. WaterStone Bank is the parent company to Waterstone Mortgage, which has the ability to lend in 48 states. For more information about WaterStone Bank, go to http://www.wsbonline.com.

Forward-Looking Statements
This press release contains statements or information that may constitute 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.”  Any such statements are based upon current expectations that involve a number of risks and uncertainties and are subject to important factors that could cause actual results to differ materially from those anticipated by the forward-looking statements. Factors that might cause such a difference include changes in interest rates; demand for products and services; the degree of competition by traditional and nontraditional competitors; changes in banking regulation or actions by bank regulators; changes in tax laws; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; changes in the national and local economies, including significant disruption to financial market and other economic activity caused by the outbreak of COVID-19; and other factors, including risk 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,
  2021  2020 2021  2020
 (In Thousands, except per share amounts)
Interest income:    
Loans$16,480 $18,493$33,083 $36,180
Mortgage-related securities 486  670 977  1,372
Debt securities, federal funds sold and short-term investments 858  698 1,733  1,761
Total interest income 17,824  19,861 35,793  39,313
Interest expense:    
Deposits 1,078  3,947 2,595  8,265
Borrowings 2,469  2,665 4,969  5,273
Total interest expense 3,547  6,612 7,564  13,538
Net interest income 14,277  13,249 28,229  25,775
Provision (credit) for loan losses (750) 4,500 (1,820) 5,285
Net interest income after provision for loan losses 15,027  8,749 30,049  20,490
Noninterest income:    
Service charges on loans and deposits 657  2,231 1,347  2,712
Increase in cash surrender value of life insurance 684  520 985  873
Mortgage banking income 49,649  63,774 104,040  94,180
Other 1,054  379 1,871  603
Total noninterest income 52,044  66,904 108,243  98,368
Noninterest expenses:    
Compensation, payroll taxes, and other employee benefits 33,926  36,889 68,049  61,290
Occupancy, office furniture, and equipment 2,293  2,534 4,858  5,275
Advertising 911  864 1,735  1,764
Data processing 914  1,095 1,885  2,101
Communications 326  317 657  655
Professional fees 569  1,077 254  2,909
Real estate owned -  33 (12) 44
Loan processing expense 1,200  1,208 2,535  2,284
Other 3,158  3,672 6,336  6,575
Total noninterest expenses 43,297  47,689 86,297  82,897
Income before income taxes 23,774  27,964 51,995  35,961
Income tax expense 5,880  7,016 12,757  8,944
Net income$17,894 $20,948$39,238 $27,017
Income per share:    
Basic$0.75 $0.86$1.65 $1.08
Diluted$0.74 $0.85$1.64 $1.08
Weighted average shares outstanding:    
Basic 23,848  24,464 23,792  24,934
Diluted 24,029  24,513 23,996  25,071
           


WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 June 30,December 31,
  2021  2020 
 (Unaudited) 
Assets(In Thousands, except per share amounts)
Cash$197,981 $56,190 
Federal funds sold 11,531  18,847 
Interest-earning deposits in other financial institutions and other short term investments 19,227  19,730 
Cash and cash equivalents 228,739  94,767 
Securities available for sale (at fair value) 172,224  159,619 
Loans held for sale (at fair value) 352,627  402,003 
Loans receivable 1,296,441  1,375,137 
Less: Allowance for loan losses 17,410  18,823 
Loans receivable, net 1,279,031  1,356,314 
   
Office properties and equipment, net 23,186  23,722 
Federal Home Loan Bank stock (at cost) 26,538  26,720 
Cash surrender value of life insurance 64,738  63,573 
Real estate owned, net 150  322 
Prepaid expenses and other assets 54,720  57,547 
Total assets$2,201,953 $2,184,587 
   
Liabilities and Shareholders' Equity  
Liabilities:  
Demand deposits$208,523 $188,225 
Money market and savings deposits 351,394  295,317 
Time deposits 671,143  701,328 
Total deposits 1,231,060  1,184,870 
   
Borrowings 475,000  508,074 
Advance payments by borrowers for taxes 17,657  3,522 
Other liabilities 46,498  75,003 
Total liabilities 1,770,215  1,771,469 
   
Shareholders' equity:  
Preferred stock -  - 
Common stock 252  251 
Additional paid-in capital 182,346  180,684 
Retained earnings 263,048  245,287 
Unearned ESOP shares (14,837) (15,430)
Accumulated other comprehensive income, net of taxes 929  2,326 
Total shareholders' equity 431,738  413,118 
Total liabilities and shareholders' equity$2,201,953 $2,184,587 
   
Share Information   
Shares outstanding 25,213  25,088 
Book value per share$17.12 $16.47 
Closing market price$19.66 $18.82 
Price to book ratio 114.84% 114.27%
   


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,
  2021  2021  2020  2020  2020 
 (Dollars in Thousands, except per share amounts)
Condensed Results of Operations:     
Net interest income$14,277 $13,952 $14,316 $13,409 $13,249 
Provision (credit) for loan losses (750) (1,070) 30  1,025  4,500 
Total noninterest income 52,044  56,199  69,886  75,763  66,904 
Total noninterest expense 43,297  43,000  47,163  53,001  47,689 
Income before income taxes 23,774  28,221  37,009  35,146  27,964 
Income tax expense 5,880  6,877  9,174  8,853  7,016 
Net income$17,894 $21,344 $27,835 $26,293 $20,948 
Income per share basic$0.75 $0.90 $1.17 $1.08 $0.86 
Income per share diluted$0.74 $0.89 $1.17 $1.08 $0.85 
Dividends declared per share$0.70 $0.20 $0.50 $0.12 $0.12 
      
Performance Ratios (annualized):     
Return on average assets - QTD 3.25% 3.99% 4.96% 4.78% 3.87%
Return on average equity - QTD 16.49% 20.49% 27.11% 26.30% 22.39%
Net interest margin - QTD 2.78% 2.80% 2.73% 2.63% 2.62%
      
Return on average assets - YTD 3.62% 3.99% 3.77% 3.35% 2.59%
Return on average equity - YTD 18.49% 20.49% 20.18% 18.02% 14.03%
Net interest margin - YTD 2.79% 2.80% 2.67% 2.64% 2.65%
      
Asset Quality Ratios:     
Past due loans to total loans 0.53% 0.52% 0.57% 0.39% 0.45%
Nonaccrual loans to total loans 0.34% 0.31% 0.40% 0.42% 0.39%
Nonperforming assets to total assets 0.20% 0.20% 0.27% 0.31% 0.28%
Allowance for loan losses to loans receivable 1.34% 1.33% 1.37% 1.31% 1.24%
                


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,
  2021  2021  2020  2020  2020 
Average balances(Dollars in Thousands)
Interest-earning assets     
Loans receivable and held for sale$1,655,078 $1,657,260 $1,775,455 $1,766,715 $1,759,970 
Mortgage related securities 100,056  90,457  91,199  96,529  105,727 
Debt securities, federal funds sold and short term investments 308,105  273,929  217,356  166,160  164,306 
Total interest-earning assets 2,063,239  2,021,646  2,084,010  2,029,404  2,030,003 
Noninterest-earning assets 143,375  147,781  147,573  160,526  147,342 
Total assets$2,206,614 $2,169,427 $2,231,583 $2,189,930 $2,177,345 
      
Interest-bearing liabilities     
Demand accounts$63,610 $55,552 $53,771 $50,590 $45,289 
Money market, savings, and escrow accounts 350,270  314,418  304,467  282,349  252,500 
Certificates of deposit 690,196  705,712  726,132  741,265  730,573 
Total interest-bearing deposits 1,104,076  1,075,682  1,084,370  1,074,204  1,028,362 
Borrowings 480,054  482,665  546,070  531,588  609,863 
Total interest-bearing liabilities 1,584,130  1,558,347  1,630,440  1,605,792  1,638,225 
                
Noninterest-bearing demand deposits 141,648  138,446  128,665  129,911  115,605 
Noninterest-bearing liabilities 45,658  50,188  64,001  56,451  47,140 
Total liabilities 1,771,436  1,746,981  1,823,106  1,792,154  1,800,970 
Equity 435,178  422,446  408,477  397,776  376,375 
Total liabilities and equity$2,206,614 $2,169,427 $2,231,583 $2,189,930 $2,177,345 
      
Average Yield/Costs (annualized)     
Loans receivable and held for sale 3.99% 4.06% 4.08% 4.10% 4.23%
Mortgage related securities 1.95% 2.20% 2.30% 2.42% 2.55%
Debt securities, federal funds sold and short term investments 1.12% 1.30% 1.59% 1.75% 1.71%
Total interest-earning assets 3.47% 3.60% 3.75% 3.83% 3.93%
      
Demand accounts 0.08% 0.07% 0.07% 0.09% 0.08%
Money market and savings accounts 0.23% 0.32% 0.53% 0.67% 0.74%
Certificates of deposit 0.50% 0.72% 1.20% 1.62% 1.91%
Total interest-bearing deposits 0.39% 0.57% 0.96% 1.29% 1.54%
Borrowings 2.06% 2.10% 1.97% 1.98% 1.76%
Total interest-bearing liabilities 0.90% 1.05% 1.30% 1.52% 1.62%
      


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,
  2021  2021  2020  2020  2020 
 (Dollars in Thousands)
Condensed Results of Operations:     
Net interest income$14,517 $14,247 $14,546 $13,461 $13,701 
Provision for loan losses (750) (1,100) -  1,000  4,325 
Total noninterest income 1,630  1,243  1,655  3,104  2,936 
Noninterest expenses:     
Compensation, payroll taxes, and other employee benefits 4,874  4,975  5,159  5,000  4,906 
Occupancy, office furniture and equipment 887  1,025  934  874  866 
Advertising 260  209  244  252  297 
Data processing 466  511  511  490  678 
Communications 86  119  110  113  91 
Professional fees 198  194  5  266  226 
Real estate owned -  (12) (63) 11  33 
Loan processing expense -  -  -  -  - 
Other 461  440  577  818  532 
Total noninterest expense 7,232  7,461  7,477  7,824  7,629 
Income before income taxes 9,665  9,129  8,724  7,741  4,683 
Income tax expense 2,128  1,786  1,926  1,565  574 
Net income$7,537 $7,343 $6,798 $6,176 $4,109 
      
Efficiency ratio - QTD 44.79% 48.17% 46.15% 47.23% 45.86%
Efficiency ratio - YTD 46.44% 48.17% 48.71% 49.59% 50.86%
      

        

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,
  2021  2021  2020  2020  2020 
 (Dollars in Thousands)
Condensed Results of Operations:     
Net interest income$(251)$(350)$(223)$(58)$(511)
Provision for loan losses -  30  30  25  175 
Total noninterest income 50,556  55,035  68,500  73,143  64,218 
Noninterest expenses:     
Compensation, payroll taxes, and other employee benefits 29,170  29,262  33,347  34,559  32,139 
Occupancy, office furniture and equipment 1,406  1,540  1,545  1,595  1,668 
Advertising 651  615  822  609  567 
Data processing 443  454  402  426  413 
Communications 240  212  225  226  226 
Professional fees 361  (524) 441  4,465  850 
Real estate owned -  -  -  -  - 
Loan processing expense 1,200  1,335  1,026  1,336  1,208 
Other 2,678  2,681  2,110  2,444  3,239 
Total noninterest expense 36,149  35,575  39,918  45,660  40,310 
Income before income taxes 14,156  19,080  28,329  27,400  23,222 
Income tax expense 3,761  5,096  7,252  7,284  6,440 
Net income$10,395 $13,984 $21,077 $20,116 $16,782 
      
Efficiency ratio - QTD 71.86% 65.05% 58.46% 62.48% 63.27%
Efficiency ratio - YTD 68.32% 65.05% 65.20% 67.95% 72.70%
      
Loan originations$1,065,161 $1,115,091 $1,282,321 $1,296,725 $1,142,683 
Purchase 75.4% 56.1% 59.2% 64.1% 55.5%
Refinance 24.6% 43.9% 40.8% 35.9% 44.5%
Gross margin on loans sold(1) 4.81% 4.86% 5.40% 5.44% 5.45%
(1) - Gross margin on loans sold equals mortgage banking income (excluding the change in interest rate lock value) divided by total loan originations
      



Coordonnées