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,
  20192018
   
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, 
 20192018
 (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,
 20192018201820182018
 (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,
 20192018201820182018
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,
 20192018201820182018
 (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,
 20192018201820182018
 (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. Gerke
Chief Financial Officer
414.459.4012
markgerke@wsbonline.com