Waterstone Financial, Inc. Announces Results of Operations for the Quarter Ended March 31, 2019

WAUWATOSA, Wis., April 23, 2019 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $6.5 million, or $0.24 per diluted share for the quarter ended March 31, 2019 compared to $7.0 million, or $0.25 per diluted share for the quarter ended March 31, 2018.

“We achieved strong quarterly earnings driven by a record pre-tax earnings in the first quarter for the Community Banking segment,” said Douglas Gordon, CEO of Waterstone Financial, Inc. “Due to the consistent earnings and strong capital position, we were able to declare a $0.50 special dividend, in addition to our regular quarterly dividend and stock repurchases. We continue to maintain strong asset quality and remain disciplined with respect to expense management at the Community Banking segment. The Mortgage Banking segment’s performance rebounded compared to the linked quarter, driven by the elimination of underperforming offices and continued expense control measures.”

Highlights of the quarter ended March 31, 2019

Waterstone Financial, Inc. (Consolidated)

• Consolidated net income of Waterstone Financial, Inc. totaled $6.5 million for the quarter ended March 31, 2019, compared to $7.0 million for the quarter ended March 31, 2018.
• Consolidated return on average assets was 1.39% for the quarter ended March 31, 2019 compared to 1.57% for the quarter ended March 31, 2018.
• Consolidated return on average equity was 6.65% for the quarter ended March 31, 2019 and 6.90% for the quarter ended March 31, 2018.
• Dividends declared totaled $0.62 per share during the quarter ended March 31, 2019.
• The Company repurchased a total 462,400 shares on the open market during the quarter ended March 31, 2019 at an average price of $16.53 per share.

Community Banking Segment

• Pre-tax income of the segment totaled $7.5 million for the quarters ended March 31, 2019 and March 31, 2018.
• Net interest income of the segment totaled $13.1 million for the quarter ended March 31, 2019 compared to $13.3 million for the quarter ended March 31, 2018.
• Average loans held for investment totaled $1.38 billion during the quarter ended March 31, 2019, which represents an increase of $78.9 million, or 6.1% over the comparable quarter in the prior year. Average loans increased $10.4 million, or 3.1% annualized, compared to the quarter ended December 31, 2018.
• Our net interest margin decreased 27 basis points to 2.93% for the quarter ended March 31, 2019 compared to 3.20% for the quarter ended March 31, 2018, which was a result of the increase in cost of deposits as certificates of deposit repriced at higher rates over the past year. Net interest margin decreased six basis points compared to 2.99% for the quarter ended December 31, 2018.
• The segment had a negative provision for loan losses of $700,000 for the quarter ended March 31, 2019 compared to $900,000 for the quarter ended March 31, 2018. Asset quality continues to remain strong along with minimal net charge-offs.
• Noninterest income decreased $58,000 for the quarter ended March 31, 2019 compared to the quarter ended March 31, 2018 as fees earned on loans decreased.
• Noninterest expenses decreased $445,000 for the quarter ended March 31, 2019 compared to the quarter ended March 31, 2018 as compensation; communications; real estate owned; and other noninterest expenses decreased.
• The efficiency ratio for the community banking segment improved 230 basis points to 51.64% for the quarter ended March 31, 2019, compared to 53.94% for the quarter ended March 31, 2018.
• Average deposits totaled $1.04 billion during the quarter ended March 31, 2019, which represents an increase of $66.3 million, or 6.8%, over the comparable quarter in the prior year.  Average deposits increased $19.0 million, or 7.5% annualized, compared to the quarter ended December 31, 2018.
• Nonperforming assets as percentage of total assets was 0.44% at March 31, 2019, 0.45% at December 31, 2018, and 0.54% at March 31, 2018.
• Past due loans as percentage of total loans was 0.46% at March 31, 2019, 0.50% at December 31, 2018, and 0.53% at March 31, 2018.
• Net charge-offs were $8,000 for the quarter ended March 31, 2019.  Net charge-offs were $7,000 for the quarter ended March 31, 2018.

Mortgage Banking Segment

• The Mortgage Banking segment totaled a pre-tax income of $1.0 million for the quarter ended March 31, 2019, compared to $1.6 million of pre-tax income for the quarter ended March 31, 2018.
• Loan originations decreased approximately $14.6 million to $501.4 million during the quarter ended March 31, 2019, compared to $516.0 million during the quarter ended March 31, 2018.  Origination volume relative to purchase activity accounted for 89.9% of originations for the quarter ended March 31, 2019 compared to 85.0% of total originations for the quarter ended March 31, 2018.
• Mortgage banking income decreased $1.2 million, or 4.7%, to $23.6 million for the quarter ended March 31, 2019, compared to $24.7 million for the quarter ended March 31, 2018.
• Gross margin on loans sold decreased 1.3% to 4.57% for the quarter ended March 31, 2019, compared to 4.63% for the quarter ended March 31, 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 March 31,
		2019		2018
Interest income:		(In Thousands, except per share amounts)
Loans	$	17,104		15,458
Mortgage-related securities		759		638
Debt securities, federal funds sold and short-term investments		1,309		867
Total interest income		19,172		16,963
Interest expense:
Deposits		3,990		2,314
Borrowings		2,246		1,508
Total interest expense		6,236		3,822
Net interest income		12,936		13,141
Provision for loan losses		(680	)	(880	)
Net interest income after provision for loan losses		13,616		14,021
Noninterest income:
Service charges on loans and deposits		379		399
Increase in cash surrender value of life insurance		344		328
Mortgage banking income		23,359		24,187
Other		175		269
Total noninterest income		24,257		25,183
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		20,639		20,983
Occupancy, office furniture, and equipment		2,776		2,639
Advertising		958		860
Data processing		769		625
Communications		328		382
Professional fees		695		700
Real estate owned		32		317
Loan processing expense		805		988
Other		2,347		2,653
Total noninterest expenses		29,349		30,147
Income before income taxes		8,524		9,057
Income tax expense		1,982		2,104
Net income	$	6,542		6,953
Income per share:
Basic	$	0.25		0.25
Diluted	$	0.24		0.25
Weighted average shares outstanding:
Basic		26,499		27,509
Diluted		26,720		27,802

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
	March 31,			December 31,
	2019			2018
	(Unaudited)
Assets	(In Thousands, except per share amounts)
Cash	$	77,381		$	48,234
Federal funds sold		17,905			25,100
Interest-earning deposits in other financial institutions and other short term investments		9,547			12,767
Cash and cash equivalents		104,833			86,101
Securities available for sale (at fair value)		184,224			185,720
Loans held for sale (at fair value)		123,011			141,616
Loans receivable		1,379,866			1,379,148
Less: Allowance for loan losses		12,561			13,249
Loans receivable, net		1,367,305			1,365,899
Office properties and equipment, net		24,215			24,524
Federal Home Loan Bank stock (at cost)		19,350			19,350
Cash surrender value of life insurance		67,894			67,550
Real estate owned, net		1,649			2,152
Prepaid expenses and other assets		36,184			22,469
Total assets	$	1,928,665		$	1,915,381
Liabilities and Shareholders' Equity
Liabilities:
Demand deposits	$	128,470		$	139,111
Money market and savings deposits		175,380			163,511
Time deposits		733,491			735,873
Total deposits		1,037,341			1,038,495
Borrowings		448,451			435,046
Advance payments by borrowers for taxes		11,409			4,371
Other liabilities		46,996			37,790
Total liabilities		1,544,197			1,515,702
Shareholders' equity:
Common stock		280			285
Additional paid-in capital		331,128			330,327
Retained earnings		177,303			187,153
Unearned ESOP shares		(17,507	)		(17,804	)
Accumulated other comprehensive loss, net of taxes		(851	)		(2,361	)
Cost of shares repurchased		(105,885	)		(97,921	)
Total shareholders' equity		384,468			399,679
Total liabilities and shareholders' equity	$	1,928,665		$	1,915,381
Share Information
Shares outstanding		28,004			28,463
Book value per share	$	13.73		$	14.04
Closing market price	$	16.46		$	16.76
Price to book ratio		119.88	%		119.37	%

 

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
	At or For the Three Months Ended
	March 31,			December 31,		September 30,		June 30,		March 31,
	2019			2018		2018		2018		2018
	(Dollars in Thousands, except per share amounts)
Condensed Results of Operations:
Net interest income	$	12,936		13,466		13,850		13,720		13,141
Provision for loan losses		(680	)	-		40		(220	)	(880	)
Total noninterest income		24,257		25,636		34,062		33,318		25,183
Total noninterest expense		29,349		31,846		36,426		34,737		30,147
Income before income taxes		8,524		7,256		11,446		12,521		9,057
Income tax expense		1,982		1,578		2,743		3,101		2,104
Net income	$	6,542		5,678		8,703		9,420		6,953
Income per share – basic	$	0.25		0.21		0.32		0.34		0.25
Income per share – diluted	$	0.24		0.21		0.31		0.34		0.25
Dividends declared per share	$	0.62		0.12		0.12		0.12		0.62
Performance Ratios:
Return on average assets - QTD		1.39	%	1.18	%	1.80	%	2.02	%	1.57	%
Return on average equity - QTD		6.65	%	5.58	%	8.48	%	9.40	%	6.90	%
Net interest margin - QTD		2.93	%	2.99	%	3.07	%	3.14	%	3.18	%
Return on average assets - YTD		1.39	%	1.64	%	1.80	%	1.80	%	1.57	%
Return on average equity - YTD		6.65	%	7.60	%	8.25	%	8.13	%	6.90	%
Net interest margin - YTD		2.93	%	3.09	%	3.13	%	3.16	%	3.18	%
Asset Quality Ratios:
Past due loans to total loans		0.46	%	0.50	%	0.67	%	0.54	%	0.53	%
Nonaccrual loans to total loans		0.49	%	0.48	%	0.48	%	0.46	%	0.50	%
Nonperforming assets to total assets		0.44	%	0.45	%	0.45	%	0.45	%	0.54	%

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF QUARTERLY AVERAGE BALANCES AND YIELD/COSTS
(Unaudited)
	At or For the Three Months Ended
	March 31,			December 31,		September 30,		June 30,		March 31,
	2019			2018		2018		2018		2018
Average balances	(Dollars in Thousands)
Interest-earning assets
Loans receivable and held for sale	$	1,477,991		1,496,125		1,507,632		1,451,507		1,398,043
Mortgage related securities		115,674		111,004		106,047		109,879		113,688
Debt securities, federal funds sold and short term investments		194,669		179,232		176,733		192,422		165,863
Total interest-earning assets		1,788,334		1,786,361		1,790,412		1,753,808		1,677,594
Noninterest-earning assets		125,396		119,715		122,575		119,291		113,317
Total assets	$	1,913,730		1,906,076		1,912,987		1,873,099		1,790,911
Interest-bearing liabilities
Demand accounts	$	36,268		36,941		37,936		37,291		37,384
Money market and savings accounts		176,237		184,873		185,864		166,587		153,226
Certificates of deposit		735,471		722,774		707,970		707,758		697,644
Total interest-bearing deposits		947,976		944,588		931,770		911,636		888,254
Borrowings		438,905		439,601		444,570		445,064		379,115
Total interest-bearing liabilities		1,386,881		1,384,189		1,376,340		1,356,700		1,267,369
Noninterest-bearing demand deposits		97,951		97,677		100,804		96,108		91,806
Noninterest-bearing liabilities		30,027		20,219		28,632		18,266		22,828
Total liabilities		1,514,859		1,502,085		1,505,776		1,471,074		1,382,003
Equity		398,871		403,991		407,211		402,025		408,908
Total liabilities and equity	$	1,913,730		1,906,076		1,912,987		1,873,099		1,790,911
Average Yield/Costs
Loans receivable and held for sale		4.69	%	4.63	%	4.56	%	4.61	%	4.48	%
Mortgage related securities		2.66	%	2.58	%	2.41	%	2.35	%	2.28	%
Debt securities, federal funds sold and short term investments		2.73	%	2.52	%	2.39	%	2.12	%	2.12	%
Total interest-earning assets		4.35	%	4.29	%	4.22	%	4.20	%	4.10	%
Demand accounts		0.09	%	0.09	%	0.10	%	0.09	%	0.08	%
Money market and savings accounts		0.63	%	0.47	%	0.35	%	0.30	%	0.24	%
Certificates of deposit		2.04	%	1.82	%	1.62	%	1.46	%	1.29	%
Total interest-bearing deposits		1.71	%	1.49	%	1.30	%	1.19	%	1.06	%
Borrowings		2.08	%	2.10	%	1.90	%	1.74	%	1.61	%
Total interest-bearing liabilities		1.82	%	1.68	%	1.50	%	1.37	%	1.22	%

 

COMMUNITY BANKING SEGMENT
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
	At or For the Three Months Ended
	March 31,			December 31,		September 30,		June 30,		March 31,
	2019			2018		2018		2018		2018
	(Dollars in Thousands)
Condensed Results of Operations:
Net interest income	$	13,132		13,774		14,121		13,747		13,304
Provision for loan losses		(700	)	-		-		(250	)	(900	)
Total noninterest income		881		911		1,312		1,137		939
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		4,756		4,761		4,435		4,301		4,888
Occupancy, office furniture and equipment		972		842		826		813		826
Advertising		181		185		183		241		140
Data processing		457		422		414		400		435
Communications		82		92		112		121		100
Professional fees		268		339		257		180		191
Real estate owned		32		(62	)	(128	)	(126	)	317
Loan processing expense		-		-		-		-		-
Other		489		571		701		658		785
Total noninterest expense		7,237		7,150		6,800		6,588		7,682
Income before income taxes		7,476		7,535		8,633		8,546		7,461
Income tax expense		1,687		1,632		2,003		1,970		1,668
Net income	$	5,789		5,903		6,630		6,576		5,793
Efficiency ratio - QTD		51.64	%	48.69	%	44.06	%	44.27	%	53.94	%
Efficiency ratio - YTD		51.64	%	47.63	%	47.28	%	49.00	%	53.94	%

   

MORTGAGE BANKING SEGMENT
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
	At or For the Three Months Ended
	March 31,			December 31,		September 30,		June 30,		March 31,
	2019			2018		2018		2018		2018
	(Dollars in Thousands)
Condensed Results of Operations:
Net interest income	$	(208	)	(332	)	(286	)	(40	)	(192	)
Provision for loan losses		20		-		40		30		20
Total noninterest income		23,571		24,986		33,165		32,547		24,731
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		16,060		18,499		23,164		22,078		16,241
Occupancy, office furniture and equipment		1,804		2,018		1,925		1,792		1,813
Advertising		777		854		1,041		759		720
Data processing		308		309		386		224		186
Communications		246		290		300		314		282
Professional fees		426		52		319		458		514
Real estate owned		-		-		-		-		-
Loan processing expense		805		643		837		904		988
Other		1,912		2,297		2,064		1,964		2,197
Total noninterest expense		22,338		24,962		30,036		28,493		22,941
Income before income taxes		1,005		(308	)	2,803		3,984		1,578
Income tax expense		286		(62	)	737		1,133		435
Net income	$	719		(246	)	2,066		2,851		1,143
Efficiency ratio - QTD		95.61	%	101.25	%	91.35	%	87.65	%	93.49	%
Efficiency ratio - YTD		95.61	%	92.89	%	90.60	%	90.16	%	93.49	%
Loan originations		501,432		600,156		761,206		721,184		516,020
Purchase		89.9	%	91.1	%	92.1	%	92.6	%	85.1	%
Refiance		10.1	%	8.9	%	7.9	%	7.4	%	14.9	%
Gross margin on loans sold(1)		4.57	%	4.42	%	4.49	%	4.45	%	4.63	%
(1) - Gross margin on loans sold is the ratio of mortgage banking income (excluding the change in interest rate lock fair value) divided by total loan originations

Contact: Mark R. GerkeChief Financial Officer414.459.4012[email protected]

 

Source: Waterstone Financial, Inc.

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