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

770 Days ago

WAUWATOSA, Wis., Oct. 23, 2019 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $10.9 million, or $0.42 per diluted share for the quarter ended September 30, 2019 compared to $8.7 million, or $0.31 per diluted share for the quarter ended September 30, 2018. Net income per diluted share was $1.03 for the nine months ended September 30, 2019 compared to net income per diluted share of $0.90 for the nine months ended September 30, 2018.

“We are pleased with our strong results in the third quarter,” said Douglas Gordon, CEO of Waterstone Financial, Inc. “We generated a record $14.5 million in consolidated quarterly pre-tax income, which represents a 26.6% increase over the prior year’s comparable quarter. The results reflect a record pre-tax quarter from the Community Banking segment and a very strong Mortgage Banking segment performance. During the quarter, the Community Banking segment remained disciplined with respect to cost management, while continuing to focus on future growth and the customer experience through the opening of a new branch. The Mortgage Banking segment had a strong performance due to increased production volumes of refinance products and a continued focus on improved efficiencies at the branch and corporate levels.”

Highlights of the Quarter Ended September 30, 2019

Waterstone Financial, Inc. (Consolidated)

Consolidated net income of Waterstone Financial, Inc. totaled $10.9 million for the quarter ended September 30, 2019, compared to $8.7 million for the quarter ended September 30, 2018.
Consolidated return on average assets was 2.17% for the quarter ended September 30, 2019 compared to 1.80% for the quarter ended September 30, 2018.
Consolidated return on average equity was 11.15% for the quarter ended September 30, 2019 and 8.48% for the quarter ended September 30, 2018.
The Company repurchased a total 495,000 shares on the open market during the quarter ended September 30, 2019 at an average price of $16.77 per share and a total of 1,341,900 shares repurchased at an average price of $16.68 per share during the nine months ended September 30, 2019.
Dividends declared totaled $0.12 per share during the quarter ended September 30, 2019 amounting to a total of $0.86 in dividends declared per share during the nine months ended September 30, 2019.

Community Banking Segment

Pre-tax income totaled $8.7 million for the quarter ended September 30, 2019, which represents a 1.0% increase compared to $8.6 million for the quarter ended September 30, 2018.
Net interest income totaled $13.9 million for the quarter ended September 30, 2019, which represents a 1.7% decrease compared to $14.1 million for the quarter ended September 30, 2018.
Average loans held for investment totaled $1.38 billion during the quarter ended September 30, 2019, which represents an increase of $36.7 million, or 2.7%, compared to the quarter ended September 30, 2018. Average loans held for investment increased $3.3 million, or 1.0% annualized, compared to $1.38 billion for the quarter ended June 30, 2019.
Net interest margin decreased 27 basis points to 2.80% for the quarter ended September 30, 2019 compared to 3.07% for the quarter September 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 two basis points compared to 2.82% for the quarter ended June 30, 2019.
The segment had $150,000 negative provision for loan losses for the quarter ended September 30, 2019 compared to no provision for loan losses for loan losses for the quarter ended September 30, 2018. Net recoveries totaled $9,000 for the quarter ended September 30, 2019, compared to net recoveries of $63,000 for the quarter ended September 30, 2018.
Noninterest income increased $103,000 for the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018 as loan prepayment fees and earnings on life insurance policies increased.
Noninterest expenses decreased $73,000 for the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018. Compensation expenses decreased $360,000 as health insurance expense decreased. Other noninterest expenses decreased $118,000 as FDIC insurance premiums decreased. Offsetting the decreases, occupancy increased with the branch additions and real estate owned expenses increased due to lower gains on sale.
The efficiency ratio was 43.97% for the quarter ended September 30, 2019, compared to 44.06% for the quarter ended September 30, 2018.
Average deposits totaled $1.05 billion during the quarter ended September 30, 2019, an increase of $41.0 million, or 4.1%, compared to $1.01 billion during the quarter ended September 30, 2018. Average deposits increased $4.2 million, or 1.6% annualized, compared to the quarter ended June 30, 2019.
Nonperforming assets as percentage of total assets was 0.41% at September 30, 2019, 0.37% at June 30, 2019, and 0.45% at September 30, 2018.
Past due loans as percentage of total loans was 0.62% at September 30, 2019, 0.61% at June 30, 2019, and 0.67% at September 30, 2018.

Mortgage Banking Segment

Pre-tax income totaled $5.7 million for the quarter ended September 30, 2019, compared to $2.8 million of pre-tax income for the quarter ended September 30, 2018.
Loan originations increased approximately $90.1 million, or 11.8%, to $851.3 million during the quarter ended September 30, 2019, compared to $761.2 million during the quarter ended September 30, 2018. Origination volume relative to purchase activity accounted for 79.0% of originations for the quarter ended September 30, 2019 compared to 92.1% of total originations for the quarter ended September 30, 2018.
Mortgage banking income increased $3.4 million, or 10.2%, to $36.5 million for the quarter ended September 30, 2019, compared to $33.2 million for the quarter ended September 30, 2018.
Gross margin on loans sold decreased to 4.30% for the quarter ended September 30, 2019, compared to 4.39% for the quarter ended September 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/State St, Brookfield, Fox Point/North Shore, Franklin/Hales Corners, Germantown/Menomonee Falls, Greenfield/Loomis Rd, Oak Creek/27^th St, Oconomowoc/Lake Country, Pewaukee, Waukesha/Brookfield, West Allis/Greenfield Ave, and West Allis/National Ave, Wisconsin along with a commercial lending office in Minneapolis, Minnesota. 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 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 September 30,				For The Nine Months Ended September 30,
		2019		2018		2019		2018
		(In Thousands, except per share amounts)
Interest income:
Loans	$	18,558		17,340		53,688		49,498
Mortgage-related securities		737		643		2,260		1,925
Debt securities, federal funds sold and short-term investments		1,083		1,063		3,515		2,949
Total interest income		20,378		19,046		59,463		54,372
Interest expense:
Deposits		4,479		3,063		12,813		8,087
Borrowings		2,745		2,133		7,579		5,574
Total interest expense		7,224		5,196		20,392		13,661
Net interest income		13,154		13,850		39,071		40,711
Provision for loan losses		(80	)	40		(730	)	(1,060	)
Net interest income after provision for loan losses		13,234		13,810		39,801		41,771
Noninterest income:
Service charges on loans and deposits		503		442		1,272		1,332
Increase in cash surrender value of life insurance		728		695		1,579		1,496
Mortgage banking income		36,062		32,653		93,526		88,930
Other		201		272		564		805
Total noninterest income		37,494		34,062		96,941		92,563
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		27,514		27,453		75,227		74,670
Occupancy, office furniture, and equipment		2,629		2,751		8,085		7,995
Advertising		913		1,224		2,834		3,084
Data processing		1,003		809		2,641		2,057
Communications		358		412		1,039		1,229
Professional fees		954		583		2,438		1,930
Real estate owned		24		(128	)	75		63
Loan processing expense		858		837		2,542		2,729
Other		1,979		2,485		6,055		7,553
Total noninterest expenses		36,232		36,426		100,936		101,310
Income before income taxes		14,496		11,446		35,806		33,024
Income tax expense		3,572		2,743		8,697		7,948
Net income	$	10,924		8,703		27,109		25,076
Income per share:
Basic	$	0.42		0.32		1.04		0.91
Diluted	$	0.42		0.31		1.03		0.90
Weighted average shares outstanding:
Basic		25,772		27,451		26,168		27,488
Diluted		25,962		27,680		26,372		27,765


WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
	September 30,			December 31,
		2019			2018
	(Unaudited)
Assets	(In Thousands, except per share amounts)
Cash	$	45,366		$	48,234
Federal funds sold		11,268			25,100
Interest-earning deposits in other financial institutions and other short term investments		9,556			12,767
Cash and cash equivalents		66,190			86,101
Securities available for sale (at fair value)		178,056			185,720
Loans held for sale (at fair value)		237,772			141,616
Loans receivable		1,385,333			1,379,148
Less: Allowance for loan losses		12,547			13,249
Loans receivable, net		1,372,786			1,365,899

Office properties and equipment, net		24,889			24,524
Federal Home Loan Bank stock (at cost)		22,050			19,350
Cash surrender value of life insurance		69,309			67,550
Real estate owned, net		1,887			2,152
Prepaid expenses and other assets		32,490			22,469
Total assets	$	2,005,429		$	1,915,381

Liabilities and Shareholders' Equity
Liabilities:
Demand deposits	$	122,309		$	139,111
Money market and savings deposits		184,183			163,511
Time deposits		733,077			735,873
Total deposits		1,039,569			1,038,495

Borrowings		515,795			435,046
Advance payments by borrowers for taxes		26,385			4,371
Other liabilities		36,437			37,790
Total liabilities		1,618,186			1,515,702

Shareholders' equity:
Preferred stock		-			-
Common stock		271			285
Additional paid-in capital		211,557			232,406
Retained earnings		191,680			187,153
Unearned ESOP shares		(16,914	)		(17,804	)
Accumulated other comprehensive income (loss), net of taxes		649			(2,361	)
Total shareholders' equity		387,243			399,679
Total liabilities and shareholders' equity	$	2,005,429		$	1,915,381

Share Information
Shares outstanding		27,147			28,463
Book value per share	$	14.26		$	14.04
Closing market price	$	17.18		$	16.76
Price to book ratio		120.48	%		119.37	%


WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)

	At or For the Three Months Ended
	September 30,			June 30,		March 31,		December 31,		September 30,
	2019			2019		2019		2018		2018
	(Dollars in Thousands, except per share amounts)
Condensed Results of Operations:
Net interest income	$	13,154		12,981		12,936		13,466		13,850
Provision for loan losses		(80	)	30		(680	)	-		40
Total noninterest income		37,494		35,190		24,257		25,636		34,062
Total noninterest expense		36,232		35,355		29,349		31,846		36,426
Income before income taxes		14,496		12,786		8,524		7,256		11,446
Income tax expense		3,572		3,143		1,982		1,578		2,743
Net income	$	10,924		9,643		6,542		5,678		8,703
Income per share – basic	$	0.42		0.37		0.25		0.21		0.32
Income per share – diluted	$	0.42		0.37		0.24		0.21		0.31
Dividends declared per share	$	0.12		0.12		0.62		0.12		0.12

Performance Ratios (annualized):
Return on average assets - QTD		2.17	%	1.95	%	1.39	%	1.18	%	1.80	%
Return on average equity - QTD		11.15	%	9.96	%	6.65	%	5.58	%	8.48	%
Net interest margin - QTD		2.80	%	2.82	%	2.93	%	2.99	%	3.07	%

Return on average assets - YTD		1.84	%	1.67	%	1.39	%	1.64	%	1.80	%
Return on average equity - YTD		9.21	%	8.28	%	6.65	%	7.60	%	8.25	%
Net interest margin - YTD		2.85	%	2.88	%	2.93	%	3.09	%	3.13	%

Asset Quality Ratios:
Past due loans to total loans		0.62	%	0.61	%	0.46	%	0.50	%	0.67	%
Nonaccrual loans to total loans		0.46	%	0.41	%	0.49	%	0.48	%	0.48	%
Nonperforming assets to total assets		0.41	%	0.37	%	0.44	%	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
	September 30,		June 30,		March 31,		December 31,		September 30,
	2019		2019		2019		2018		2018
Average balances	(Dollars in Thousands)
Interest-earning assets
Loans receivable and held for sale	1,579,575		1,552,199		1,477,991		1,496,125		1,507,632
Mortgage related securities	114,051		114,537		115,674		111,004		106,047
Debt securities, federal funds sold and short term investments	169,621		180,111		194,669		179,232		176,733
Total interest-earning assets	1,863,247		1,846,847		1,788,334		1,786,361		1,790,412
Noninterest-earning assets	137,723		136,263		125,396		119,715		122,575
Total assets	2,000,970		1,983,110		1,913,730		1,906,076		1,912,987

Interest-bearing liabilities
Demand accounts	37,015		35,744		36,268		36,941		37,936
Money market and savings accounts	206,474		193,542		176,237		184,873		185,864
Certificates of deposit	739,544		736,798		735,471		722,774		707,970
Total interest-bearing deposits	983,033		966,084		947,976		944,588		931,770
Borrowings	509,099		504,940		438,905		439,601		444,570
Total interest-bearing liabilities	1,492,132		1,471,024		1,386,881		1,384,189		1,376,340
Noninterest-bearing demand deposits	86,849		91,545		97,951		97,677		100,804
Noninterest-bearing liabilities	33,130		32,143		30,027		20,219		28,632
Total liabilities	1,612,111		1,594,712		1,514,859		1,502,085		1,505,776
Equity	388,859		388,398		398,871		403,991		407,211
Total liabilities and equity	2,000,970		1,983,110		1,913,730		1,906,076		1,912,987

Average Yield/Costs (annualized)
Loans receivable and held for sale	4.66	%	4.66	%	4.69	%	4.63	%	4.56	%
Mortgage related securities	2.56	%	2.68	%	2.66	%	2.58	%	2.41	%
Debt securities, federal funds sold and short term investments	2.53	%	2.50	%	2.73	%	2.52	%	2.39	%
Total interest-earning assets	4.34	%	4.32	%	4.35	%	4.29	%	4.22	%

Demand accounts	0.09	%	0.09	%	0.09	%	0.09	%	0.10	%
Money market and savings accounts	0.57	%	0.66	%	0.63	%	0.47	%	0.35	%
Certificates of deposit	2.24	%	2.19	%	2.04	%	1.82	%	1.62	%
Total interest-bearing deposits	1.81	%	1.80	%	1.71	%	1.49	%	1.30	%
Borrowings	2.14	%	2.06	%	2.08	%	2.10	%	1.90	%
Total interest-bearing liabilities	1.92	%	1.89	%	1.82	%	1.68	%	1.50	%


COMMUNITY BANKING SEGMENT
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)

		At or For the Three Months Ended
		September 30,		June 30,		March 31,		December 31,		September 30,
		2019		2019		2019		2018		2018
		(Dollars in Thousands)
Condensed Results of Operations:
Net interest income	$	13,885		13,530		13,132		13,774		14,121
Provision for loan losses		(150	)	-		(700	)	-		-
Total noninterest income		1,415		1,079		881		911		1,312
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		4,075		4,671		4,756		4,761		4,435
Occupancy, office furniture and equipment		942		944		972		842		826
Advertising		202		220		181		185		183
Data processing		588		493		457		422		414
Communications		90		93		82		92		112
Professional fees		223		160		268		339		257
Real estate owned		24		19		32		(62	)	(128	)
Loan processing expense		-		-		-		-		-
Other		583		635		489		571		701
Total noninterest expense		6,727		7,235		7,237		7,150		6,800
Income before income taxes		8,723		7,374		7,476		7,535		8,633
Income tax expense		1,982		1,594		1,687		1,632		2,003
Net income	$	6,741		5,780		5,789		5,903		6,630

Efficiency ratio - QTD		43.97	%	49.52	%	51.64	%	48.69	%	44.06	%
Efficiency ratio - YTD		48.27	%	50.56	%	51.64	%	47.63	%	47.28	%

MORTGAGE BANKING SEGMENT
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)

	At or For the Three Months Ended
	September 30,			June 30,		March 31,		December 31,		September 30,
	2019			2019		2019		2018		2018
	(Dollars in Thousands)
Condensed Results of Operations:
Net interest income	$	(774	)	(529	)	(208	)	(332	)	(286	)
Provision for loan losses		70		30		20		-		40
Total noninterest income		36,535		34,364		23,571		24,986		33,165
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		23,616		22,579		16,060		18,499		23,164
Occupancy, office furniture and equipment		1,687		1,736		1,804		2,018		1,925
Advertising		711		743		777		854		1,041
Data processing		411		372		308		309		386
Communications		268		260		246		290		300
Professional fees		688		620		426		52		319
Real estate owned		-		-		-		-		-
Loan processing expense		858		879		805		643		837
Other		1,725		1,186		1,912		2,297		2,064
Total noninterest expense		29,964		28,375		22,338		24,962		30,036
Income before income taxes		5,727		5,430		1,005		(308	)	2,803
Income tax expense		1,584		1,545		286		(62	)	737
Net income	$	4,143		3,885		719		(246	)	2,066

Efficiency ratio - QTD		83.79	%	83.86	%	95.61	%	101.25	%	91.35	%
Efficiency ratio - YTD		86.79	%	88.66	%	95.61	%	92.89	%	90.60	%

Loan Originations	$	851,297		793,254		501,432		600,156		761,206
Purchase		79.0	%	87.6	%	89.9	%	91.1	%	92.1	%
Refinance		21.0	%	12.4	%	10.1	%	8.9	%	7.9	%
Gross margin on loans sold⁽¹⁾		4.30	%	4.29	%	4.57	%	4.17	%	4.39	%
(1) - Gross margin on loans sold equals mortgage banking income (excluding the change in interest rate lock value) divided by total loan originations