Waterstone Financial, Inc. Announces Results of Operations for the Quarter and Year Ended December 31, 2020

January 28, 2021 4:15 PM EST

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WAUWATOSA, Wis., Jan. 28, 2021 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $27.8 million, or $1.17 per diluted share for the quarter ended December 31, 2020 compared to $8.8 million, or $0.34 per diluted share for the quarter ended December 31, 2019. Net income per diluted share was $3.30 for the year ended December 31, 2020 compared to net income per diluted share of $1.37 for the year ended December 31, 2019.

“Our financial results continue to be outstanding, as we have just completed our third consecutive quarter of record profits,” said Douglas Gordon, Chief Executive Officer of Waterstone Financial, Inc. “The turbulent environment of 2020 demonstrated the synergies, and profitability, a community bank and its mortgage subsidiary can achieve working in harmony. Waterstone’s entire team navigated the rocky seas presented by a pandemic, achieving record results, and enhancing shareholders with dividends of $1.28 per share paid during the year.”

Highlights of the Quarter Ended December 31, 2020

Waterstone Financial, Inc. (Consolidated)

  • Consolidated net income of Waterstone Financial, Inc. totaled $27.8 million for the quarter ended December 31, 2020, compared to $8.8 million for the quarter ended December 31, 2019.
  • Consolidated return on average assets was 4.96% for the quarter ended December 31, 2020 compared to 1.75% for the quarter ended December 31, 2019.
  • Consolidated return on average equity was 27.11% for the quarter ended December 31, 2020 and 8.91% for the quarter ended December 31, 2019.
  • Dividends declared totaled $0.50 per share, which included a quarterly dividend of $0.20 per share and a special dividend of $0.30 per share. The quarterly dividend declared during the quarter represents an increase of $0.08, or 66.7%, compared to quarterly dividend rate paid in previous quarters during 2020.
  • We repurchased approximately 203,000 shares at a cost of $3.5 million during the quarter ended December 31, 2020.

Community Banking Segment

  • Pre-tax income totaled $8.7 million for the quarter ended December 31, 2020, which represents a 4.8% increase compared to $8.3 million for the quarter ended December 31, 2019.
  • Net interest income totaled $14.5 million for the quarter ended December 31, 2020, which represents an 8.0% increase compared to $13.5 million for the quarter ended December 31, 2019.
  • Average loans held for investment totaled $1.40 billion during the quarter ended December 31, 2020, which represents an increase of $21.6 million, or 1.6%, compared to $1.38 billion for the quarter ended December 31, 2019. The Paycheck Protection Program (PPP) loans originated during the year ended December 31, 2020, contributed to the growth. Average loans held for investment decreased $26.6 million, or 7.5% annualized, compared to $1.43 billion for the quarter ended September 30, 2020 as PPP loans started to pay off during the fourth quarter.
  • The PPP loans totaled $18.1 million as of December 31, 2020.
  • Net interest margin decreased six basis points to 2.73% for the quarter ended December 31, 2020 compared to 2.79% for the quarter ended December 31, 2019, which was a result of the decrease in yield of interest-earning assets as rates on loans, investments, and cash decreased. Net interest margin increased 10 basis points compared to 2.63% for the quarter ended September 30, 2020, driven by lower average rates on deposits.
  • The segment had no provision for loan losses for the quarter ended December 31, 2020 compared to a negative provision for loan losses of $200,000 for the quarter ended December 30, 2019. Net charge-offs totaled $51,000 for the quarter ended December 31, 2020, compared to net recoveries of $10,000 for the quarter ended December 31, 2019.  
  • The efficiency ratio was 46.15% for the quarter ended December 31, 2020, compared to 46.23% for the quarter ended December 31, 2019.
  • Average deposits (excluding escrow accounts) totaled $1.19 billion during the quarter ended December 31, 2020, an increase of $137.9 million, or 13.1%, compared to $1.06 billion during the quarter ended December 31, 2019. Average deposits increased $13.0 million, or 4.4% annualized compared to the $1.18 billion for the quarter ended September 30, 2020.
  • Nonperforming assets as percentage of total assets was 0.27% at December 31, 2020, 0.31% at September 30, 2020, and 0.39% at December 31, 2019.
  • Past due loans as percentage of total loans was 0.57% at December 31, 2020, 0.39% at September 30, 2020, and 0.47% at December 31, 2019.
  • The Company held approximately $9.2 million in loans, representing 0.7% of the total loan portfolio as of December 31, 2020, which had been modified as either a deferment of principal or principal and interest since the beginning of the pandemic. Of the $9.2 million in loans, $1.2 million qualify as modifications under the CARES Act. The remaining $8.0 million represents three loans that are classified as troubled debt restructurings.

Mortgage Banking Segment

  • Pre-tax income totaled $28.3 million for the quarter ended December 31, 2020, compared to $3.4 million for the quarter ended December 31, 2019.
  • Loan originations increased $505.2 million, or 65.0%, to $1.28 billion during the quarter ended December 31, 2020, compared to $777.1 million during the quarter ended December 31, 2019. Origination volume relative to purchase activity accounted for 59.2% of originations for the quarter ended December 31, 2020 compared to 72.1% of total originations for the quarter ended December 31, 2019.
  • Mortgage banking income increased $36.1 million, or 111.2%, to $68.5 million for the quarter ended December 31, 2020, compared to $32.4 million for the quarter ended December 31, 2019.
  • Gross margin on loans sold increased to 5.40% for the quarter ended December 31, 2020, compared to 4.27% for the quarter ended December 31, 2019.

Recent Developments:

COVID-19 Pandemic and the CARES Act

The Coronavirus Aid, Relief and Economic Security (“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 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 the earlier of January 1, 2022 or the end of the COVID-19 national emergency. We have elected to delay adoption of CECL. As a result, our financial statements for the quarter and year ended December 31, 2020 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 December 31,
For The Year Ended
December 31,
  2020  2019  2020  2019 
 (In Thousands, except per share amounts)
Interest income:    
Loans$18,229 $18,547 $72,633 $72,235 
Mortgage-related securities 528  718  2,488  2,978 
Debt securities, federal funds sold and short-term investments 870  1,013  3,363  4,528 
Total interest income 19,627  20,278  78,484  79,741 
Interest expense:            
Deposits 2,605  4,465  14,365  17,278 
Borrowings 2,706  2,687  10,619  10,266 
Total interest expense 5,311  7,152  24,984  27,544 
Net interest income 14,316  13,126  53,500  52,197 
Provision for loan losses 30  (170) 6,340  (900)
Net interest income after provision for loan losses 14,286  13,296  47,160  53,097 
Noninterest income:            
Service charges on loans and deposits 1,078  1,091  4,462  2,363 
Increase in cash surrender value of life insurance 318  356  1,905  1,935 
Mortgage banking income 66,953  32,140  233,245  125,666 
Other 1,537  222  4,405  786 
Total noninterest income 69,886  33,809  244,017  130,750 
Noninterest expenses:            
Compensation, payroll taxes, and other employee benefits 38,351  26,491  139,046  101,718 
Occupancy, office furniture, and equipment 2,479  2,521  10,223  10,606 
Advertising 1,066  1,051  3,691  3,885 
Data processing 918  989  3,941  3,630 
Communications 335  320  1,329  1,359 
Professional fees 471  1,167  8,118  3,605 
Real estate owned (63) (221) (8) (146)
Loan processing expense 1,026  746  4,646  3,288 
Other 2,580  2,273  12,075  8,328 
Total noninterest expenses 47,163  35,337  183,061  136,273 
Income before income taxes 37,009  11,768  108,116  47,574 
Income tax expense 9,174  2,974  26,971  11,671 
Net income$27,835 $8,794 $81,145 $35,903 
Income per share:            
Basic$1.17 $0.34 $3.32 $1.38 
Diluted$1.17 $0.34 $3.30 $1.37 
Weighted average shares outstanding:            
Basic 23,703  25,586  24,464  26,021 
Diluted 23,877  25,852  24,607  26,247 

 

 

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 December 31,December 31,
  2020  2019 
 (Unaudited) 
Assets(In Thousands, except per share amounts)
Cash$56,190 $52,814 
Federal funds sold 18,847  12,704 
Interest-earning deposits in other financial institutions and other short term investments 19,730  8,782 
Cash and cash equivalents 94,767  74,300 
Securities available for sale (at fair value) 159,619  178,476 
Loans held for sale (at fair value) 402,003  220,123 
Loans receivable 1,375,137  1,388,031 
Less: Allowance for loan losses 18,823  12,387 
Loans receivable, net 1,356,314  1,375,644 
   
Office properties and equipment, net 23,722  25,028 
Federal Home Loan Bank stock (at cost) 26,720  21,150 
Cash surrender value of life insurance 63,573  69,665 
Real estate owned, net 322  748 
Prepaid expenses and other assets 57,547  31,213 
Total assets$2,184,587 $1,996,347 
   
Liabilities and Shareholders' Equity  
Liabilities:  
Demand deposits$188,225 $130,063 
Money market and savings deposits 295,317  197,942 
Time deposits 701,328  739,771 
Total deposits 1,184,870  1,067,776 
   
Borrowings 508,074  483,562 
Advance payments by borrowers for taxes 3,522  4,212 
Other liabilities 75,003  47,111 
Total liabilities 1,771,469  1,602,661 
   
Shareholders' equity:  
Preferred stock -  - 
Common stock 251  271 
Additional paid-in capital 180,684  211,997 
Retained earnings 245,287  197,393 
Unearned ESOP shares (15,430) (16,617)
Accumulated other comprehensive income, net of taxes 2,326  642 
Total shareholders' equity 413,118  393,686 
Total liabilities and shareholders' equity$2,184,587 $1,996,347 
   
Share Information   
Shares outstanding 25,088  27,148 
Book value per share$16.47 $14.50 
Closing market price$18.82 $19.03 
Price to book ratio 114.27% 131.24%
   


WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
      
 At or For the Three Months Ended
 December 31,September 30,June 30,March 31,December 31,
  2020  2020  2020  2020  2019 
 (Dollars in Thousands, except per share amounts)
Condensed Results of Operations:     
Net interest income$14,316 $13,409 $13,249 $12,526 $13,126 
Provision for loan losses 30  1,025  4,500  785  (170)
Total noninterest income 69,886  75,763  66,904  31,464  33,809 
Total noninterest expense 47,163  53,001  47,689  35,208  35,337 
Income before income taxes 37,009  35,146  27,964  7,997  11,768 
Income tax expense 9,174  8,853  7,016  1,928  2,974 
Net income$27,835 $26,293 $20,948 $6,069 $8,794 
Income per share - basic$1.17 $1.08 $0.86 $0.24 $0.34 
Income per share - diluted$1.17 $1.08 $0.85 $0.24 $0.34 
Dividends declared per share$0.50 $0.12 $0.12 $0.62 $0.12 
      
Performance Ratios (annualized):     
Return on average assets - QTD 4.96% 4.78% 3.87% 1.21% 1.75%
Return on average equity - QTD 27.11% 26.30% 22.39% 6.24% 8.91%
Net interest margin - QTD 2.73% 2.63% 2.62% 2.68% 2.79%
      
Return on average assets - YTD 3.77% 3.35% 2.59% 1.21% 1.82%
Return on average equity - YTD 20.18% 18.02% 14.03% 6.24% 9.14%
Net interest margin - YTD 2.67% 2.64% 2.65% 2.68% 2.83%
      
Asset Quality Ratios:     
Past due loans to total loans 0.57% 0.39% 0.45% 0.78% 0.47%
Nonaccrual loans to total loans 0.40% 0.42% 0.39% 0.48% 0.51%
Nonperforming assets to total assets 0.27% 0.31% 0.28% 0.36% 0.39%
Allowance for loan losses to loans receivable 1.37% 1.31% 1.24% 0.94% 0.89%


WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF QUARTERLY AVERAGE BALANCES AND YIELD/COSTS
(Unaudited)
      
 At or For the Three Months Ended
 December 31,September 30,June 30,March 31,December 31,
  2020  2020  2020  2020  2019 
Average balances(Dollars in Thousands)
Interest-earning assets     
Loans receivable and held for sale$1,775,455 $1,766,715 $1,759,970 $1,562,097 $1,573,190 
Mortgage related securities 91,199  96,529  105,727  112,089  110,426 
Debt securities, federal funds sold and short term investments 217,356  166,160  164,306  206,485  183,447 
    Total interest-earning assets 2,084,010  2,029,404  2,030,003  1,880,671  1,867,063 
Noninterest-earning assets 147,573  160,526  147,342  132,283  125,904 
    Total assets$2,231,583 $2,189,930 $2,177,345 $2,012,954 $1,992,967 
      
Interest-bearing liabilities     
Demand accounts$53,771 $50,590 $45,289 $39,886 $38,650 
Money market, savings, and escrow accounts 304,467  282,349  252,500  218,942  215,332 
Certificates of deposit 726,132  741,265  730,573  734,147  737,726 
    Total interest-bearing deposits 1,084,370  1,074,204  1,028,362  992,975  991,708 
Borrowings 546,070  531,588  609,863  495,595  485,482 
    Total interest-bearing liabilities 1,630,440  1,605,792  1,638,225  1,488,570  1,477,190 
Noninterest-bearing demand deposits 128,665  129,911  115,605  92,627  85,815 
Noninterest-bearing liabilities 64,001  56,451  47,140  40,609  38,580 
    Total liabilities 1,823,106  1,792,154  1,800,970  1,621,806  1,601,585 
Equity 408,477  397,776  376,375  391,148  391,382 
    Total liabilities and equity$2,231,583 $2,189,930 $2,177,345 $2,012,954 $1,992,967 
      
Average Yield/Costs (annualized)     
Loans receivable and held for sale 4.08% 4.10% 4.23% 4.55% 4.68%
Mortgage related securities 2.30% 2.42% 2.55% 2.52% 2.58%
Debt securities, federal funds sold and short term investments 1.59% 1.75% 1.71% 2.07% 2.19%
    Total interest-earning assets 3.75% 3.83% 3.93% 4.16% 4.31%
      
Demand accounts 0.07% 0.09% 0.08% 0.08% 0.10%
Money market and savings accounts 0.53% 0.67% 0.74% 0.78% 0.66%
Certificates of deposit 1.20% 1.62% 1.91% 2.13% 2.20%
    Total interest-bearing deposits 0.96% 1.29% 1.54% 1.75% 1.79%
Borrowings 1.97% 1.98% 1.76% 2.12% 2.20%
    Total interest-bearing liabilities 1.30% 1.52% 1.62% 1.87% 1.92%
      


COMMUNITY BANKING SEGMENT
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
      
 At or For the Three Months Ended
 December 31,September 30,June 30,March 31,December 31,
  2020  2020  2020  2020  2019 
 (Dollars in Thousands)
Condensed Results of Operations:     
Net interest income$14,546 $13,461 $13,701 $12,908 $13,472 
Provision for loan losses -  1,000  4,325  750  (200)
Total noninterest income 1,655  3,104  2,936  1,028  1,645 
Noninterest expenses:     
Compensation, payroll taxes, and other employee benefits 5,159  5,000  4,906  5,168  4,693 
Occupancy, office furniture and equipment 934  874  866  1,014  894 
Advertising 244  252  297  248  317 
Data processing 511  490  678  605  583 
Communications 110  113  91  97  93 
Professional fees 5  266  226  198  162 
Real estate owned (63) 11  33  11  (251)
Loan processing expense -  -  -  -  - 
Other 577  818  532  580  498 
Total noninterest expense 7,477  7,824  7,629  7,921  6,989 
Income before income taxes 8,724  7,741  4,683  5,265  8,328 
Income tax expense 1,926  1,565  574  1,154  2,033 
Net income$6,798 $6,176 $4,109 $4,111 $6,295 
      
Efficiency ratio - QTD 46.15% 47.23% 45.86% 56.84% 46.23%
Efficiency ratio - YTD 48.71% 49.59% 50.86% 56.84% 47.74%
      

        

MORTGAGE BANKING SEGMENT
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
      
 At or For the Three Months Ended
 December 31,September 30,June 30,March 31,December 31,
  2020  2020  2020  2020  2019 
 (Dollars in Thousands)
Condensed Results of Operations:     
Net interest income$(223)$(58)$(511)$(379)$(399)
Provision for loan losses 30  25  175  35  30 
Total noninterest income 68,500  73,143  64,218  30,798  32,440 
Noninterest expenses:     
Compensation, payroll taxes, and other employee benefits 33,347  34,559  32,139  19,387  21,975 
Occupancy, office furniture and equipment 1,545  1,595  1,668  1,727  1,627 
Advertising 822  609  567  652  734 
Data processing 402  426  413  395  402 
Communications 225  226  226  241  227 
Professional fees 441  4,465  850  1,620  1,000 
Real estate owned -  -  -  -  30 
Loan processing expense 1,026  1,336  1,208  1,076  746 
Other 2,110  2,444  3,239  2,552  1,918 
Total noninterest expense 39,918  45,660  40,310  27,650  28,659 
Income before income taxes 28,329  27,400  23,222  2,734  3,352 
Income tax expense 7,252  7,284  6,440  768  921 
Net income$21,077 $20,116 $16,782 $1,966 $2,431 
      
Efficiency ratio - QTD 58.46% 62.48% 63.27% 90.90% 89.44%
Efficiency ratio - YTD 65.20% 67.95% 72.70% 90.90% 87.47%
      
Loan originations$1,282,321 $1,296,725 $1,142,683 $708,840 $777,073 
Purchase 59.2% 64.1% 55.5% 68.3% 72.1%
Refinance 40.8% 35.9% 44.5% 31.7% 27.9%
Gross margin on loans sold(1) 5.40% 5.44% 5.45% 4.08% 4.27%
(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




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