• Waterstone Financial, Inc. Announces Results of Operations for the Quarter and Nine Months Ended September 30, 2023

    Source: Nasdaq GlobeNewswire / 24 Oct 2023 15:01:00   America/Chicago

    WAUWATOSA, Wis., Oct. 24, 2023 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $3.3 million, or $0.16 per diluted share for the quarter ended September 30, 2023, compared to $5.3 million, or $0.25 per diluted share for the quarter ended September 30, 2022. Net income per diluted share was $0.46 for the nine months ended September 30, 2023, compared to net income per diluted share of $0.83 for the nine months ended September 30, 2022.

    “We continue to navigate the challenges that have resulted from a rapid rise in interest rates and an inverted yield curve,” said Douglas Gordon, Chief Executive Officer of Waterstone Financial, Inc. “The Community Banking Segment continues to maintain strong asset quality metrics and we achieved growth in both loans held for investment and deposits during the quarter. The Mortgage Banking segment results continue to be negatively impacted by a challenging industry as inventory, housing affordability, and escalating interest rates have slowed mortgage origination volumes and compressed margins. We continue to try and find efficiencies in this environment. During the quarter, we were pleased to return $9.6 million back to shareholders through share repurchases and dividends declared.”

    Highlights of the Quarter Ended September 30, 2023

    Waterstone Financial, Inc. (Consolidated)

    • Consolidated net income of Waterstone Financial, Inc. totaled $3.3 million for the quarter ended September 30, 2023, compared to $5.3 million for the quarter ended September 30, 2022.
    • Consolidated return on average assets was 0.58% for the quarter ended September 30, 2023, compared to 1.08% for the quarter ended September 30, 2022.
    • Consolidated return on average equity was 3.63% for the quarter ended September 30, 2023, and 5.38% for the quarter ended September 30, 2022.
    • Dividends declared during the quarter ended September 30, 2023, totaled $0.15 per common share.
    • We repurchased approximately 516,000 shares at a cost (including the excise tax) of $6.7 million, or $12.94 per share, during the quarter ended September 30, 2023.
    • Nonperforming assets as percentage of total assets was 0.20% at September 30, 2023, 0.19% at June 30, 2023, and 0.27% at September 30, 2022.
    • Past due loans as a percentage of total loans were 0.53% at September 30, 2023, 0.50% at June 30, 2023, and 0.48% at September 30, 2022.
    • Book value per share was $16.60 on September 30, 2023, and $16.71 at December 31, 2022. Book value per share increased approximately $0.10 during the quarter ended September 30, 2023, and approximately $0.18 during the year ended September 30, 2023, due to our share repurchase activity.

    Community Banking Segment

    • Pre-tax income totaled $5.7 million for the quarter ended September 30, 2023, which represents a $2.9 million, or 33.8%, decrease compared to $8.5 million for the quarter ended September 30, 2022. 
    • Past due loans at the community banking segment were $6.7 million at September 30, 2023, $5.7 million at June 30, 2023, and $4.6 million at September 30, 2022.
    • Net interest income totaled $12.4 million for the quarter ended September 30, 2023, which represents a $3.1 million, or 19.8%, decrease compared to $15.5 million for the quarter ended September 30, 2022.
    • Average loans held for investment totaled $1.63 billion during the quarter ended September 30, 2023, which represents an increase of $316.3 million, or 24.1%, compared to $1.31 billion for the quarter ended September 30, 2022. The increase was primarily due to increases in the single-family and multi-family mortgages. Average loans held for investment increased $40.3 million compared to $1.59 billion for the quarter ended June 30, 2023. The increase was primarily due to an increase in the single-family, multi-family, construction, and commercial real estate mortgages.
    • Net interest margin decreased 108 basis points to 2.26% for the quarter ended September 30, 2023, compared to 3.34% for the quarter ended September 30, 2022, which was a result of an increase in weighted average cost of deposits and borrowings as the federal funds rate increases resulted in increased funding rates. Net interest margin decreased 21 basis points compared to 2.47% for the quarter ended June 30, 2023, driven by an increase in weighted average cost of deposits and borrowings as the federal funds rate increases resulted in increased funding rates.
    • The segment had a provision for credit losses related to funded loans of $206,000 for the quarter ended September 30, 2023, compared to a provision for credit losses related to funded loans of $262,000 for the quarter ended September 30, 2022. The current quarter increase was primarily due to an increase in originations and loan balance. The provision for credit losses related to unfunded loan commitments was $239,000 for the quarter ended September 30, 2023, compared to a negative provision for credit losses related to unfunded loan commitments of $28,000 for the quarter ended September 30, 2022. The increase for the quarter ended September 30, 2023, was due primarily to an increase of loans in the loan commitment pipeline as loan activity increased during the quarter.
    • The efficiency ratio, a non-GAAP ratio, was 54.43% for the quarter ended September 30, 2023, compared to 47.16% for the quarter ended September 30, 2022.
    • Average deposits (excluding escrow accounts) totaled $1.20 billion during the quarter ended September 30, 2023, an increase of $6.0 million, or 0.5%, compared to $1.19 billion during the quarter ended September 30, 2022. Average deposits increased $15.4 million, or 5.2% annualized, compared to the $1.18 billion for the quarter ended June 30, 2023.
    • Other noninterest expense decreased $774,000 to $703,000 during the quarter ended September 30, 2023, compared to $1.5 million during the quarter ended September 30, 2022. The decrease was driven by fees paid to the mortgage banking segment for the purchase of single-family adjustable-rate mortgage loans. These fees totaled $188,000 during the quarter ended September 30, 2023, compared to $1.0 million during the quarter ended September 30, 2022.

     Mortgage Banking Segment

    • Pre-tax loss totaled $2.1 million for the quarter ended September 30, 2023, compared to $1.8 million of pre-tax loss for the quarter ended September 30, 2022. 
    • Loan originations decreased $132.3 million, or 18.1%, to $597.6 million during the quarter ended September 30, 2023, compared to $729.9 million during the quarter ended September 30, 2022. Origination volume relative to purchase activity accounted for 95.4% of originations for the quarter ended September 30, 2023, compared to 94.2% of total originations for the quarter ended September 30, 2022.
    • Mortgage banking non-interest income decreased $5.9 million, or 21.4%, to $21.5 million for the quarter ended September 30, 2023, compared to $27.3 million for the quarter ended September 30, 2022.
    • Gross margin on loans sold decreased to 3.62% for the quarter ended September 30, 2023, compared to 3.70% for the quarter ended September 30, 2022.
    • Total compensation, payroll taxes and other employee benefits decreased $4.7 million, or 21.4%, to $17.2 million during the quarter ended September 30, 2023, compared to $21.9 million during the quarter ended September 30, 2022. The decrease primarily related to decreased commission expense and salary expense driven by decreased loan origination volume and reduced employee headcount.

    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; 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.

    Non-GAAP Financial Measures 

    Management uses non-GAAP financial information in its analysis of the Company's performance. Management believes that this non-GAAP measure provides a greater understanding of ongoing operations and enhance comparability of results of operations with prior periods. The Company’s management believes that investors may use this non-GAAP measure to analyze the Company's financial performance without the impact of unusual items or events that may obscure trends in the Company’s underlying performance. This non-GAAP data should be considered in addition to results prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP results. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in this measure and that different companies might calculate this measure differently. 



    WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF INCOME
    (Unaudited)
     
     For The Three Months Ended September 30,  For The Nine Months Ended September 30, 
     2023  2022  2023  2022 
     (In Thousands, except per share amounts) 
    Interest income:               
    Loans$23,825  $16,235  $65,860  $44,281 
    Mortgage-related securities 1,060   903   2,972   2,326 
    Debt securities, federal funds sold and short-term investments 1,492   987   3,682   2,964 
    Total interest income 26,377   18,125   72,514   49,571 
    Interest expense:               
    Deposits 7,442   981   17,485   2,511 
    Borrowings 6,946   1,746   16,570   5,717 
    Total interest expense 14,388   2,727   34,055   8,228 
    Net interest income 11,989   15,398   38,459   41,343 
    Provision for credit losses 445   332   1,091   304 
    Net interest income after provision for loan losses 11,544   15,066   37,368   41,039 
    Noninterest income:               
    Service charges on loans and deposits 450   529   1,491   1,705 
    Increase in cash surrender value of life insurance 334   354   1,373   1,394 
    Mortgage banking income 21,172   26,064   59,856   83,749 
    Other 274   457   1,589   1,612 
    Total noninterest income 22,230   27,404   64,309   88,460 
    Noninterest expenses:               
    Compensation, payroll taxes, and other employee benefits 21,588   26,174   64,035   77,502 
    Occupancy, office furniture, and equipment 1,993   2,296   6,302   6,540 
    Advertising 916   1,137   2,749   3,004 
    Data processing 1,229   1,084   3,441   3,430 
    Communications 243   302   719   900 
    Professional fees 745   393   1,779   1,203 
    Real estate owned 1   1   3   6 
    Loan processing expense 722   1,120   2,672   3,685 
    Other 2,584   3,187   8,350   9,408 
    Total noninterest expenses 30,021   35,694   90,050   105,678 
    Income before income taxes 3,753   6,776   11,627   23,821 
    Income tax expense 500   1,506   2,212   5,269 
    Net income$3,253  $5,270  $9,415  $18,552 
    Income per share:               
    Basic$0.16  $0.25  $0.46  $0.84 
    Diluted$0.16  $0.25  $0.46  $0.83 
    Weighted average shares outstanding:               
    Basic 19,998   21,342   20,420   22,193 
    Diluted 20,022   21,454   20,473   22,323 



    WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
          
     September 30,  December 31, 
     2023  2022 
     (Unaudited)     
    Assets(In Thousands, except per share amounts) 
    Cash$55,796  $33,700 
    Federal funds sold 6,237   10,683 
    Interest-earning deposits in other financial institutions and other short-term investments 260   2,259 
    Cash and cash equivalents 62,293   46,642 
    Securities available for sale (at fair value) 194,499   196,588 
    Loans held for sale (at fair value) 157,421   131,188 
    Loans receivable 1,651,093   1,510,178 
    Less: Allowance for credit losses ("ACL") - loans 18,553   17,757 
    Loans receivable, net 1,632,540   1,492,421 
            
    Office properties and equipment, net 20,040   21,105 
    Federal Home Loan Bank stock (at cost) 23,414   17,357 
    Cash surrender value of life insurance 67,522   66,443 
    Real estate owned, net 372   145 
    Prepaid expenses and other assets 63,257   59,783 
    Total assets$2,221,358  $2,031,672 
            
    Liabilities and Shareholders' Equity       
    Liabilities:       
    Demand deposits$189,954  $230,596 
    Money market and savings deposits 281,958   326,145 
    Time deposits 733,250   642,271 
    Total deposits 1,205,162   1,199,012 
            
    Borrowings 587,917   386,784 
    Advance payments by borrowers for taxes 28,238   5,334 
    Other liabilities 53,715   70,056 
    Total liabilities 1,875,032   1,661,186 
            
    Shareholders' equity:       
    Preferred stock -   - 
    Common stock 209   222 
    Additional paid-in capital 110,020   128,550 
    Retained earnings 272,535   274,246 
    Unearned ESOP shares (12,166)  (13,056)
    Accumulated other comprehensive loss, net of taxes (24,272)  (19,476)
    Total shareholders' equity 346,326   370,486 
    Total liabilities and shareholders' equity$2,221,358  $2,031,672 
            
    Share Information       
    Shares outstanding 20,860   22,174 
    Book value per share$16.60  $16.71 



    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, 
     2023  2023  2023  2022  2022 
     (Dollars in Thousands, except per share amounts) 
    Condensed Results of Operations:                   
    Net interest income$11,989  $12,675  $13,795  $15,611  $15,398 
    Provision for credit losses 445   186   460   664   332 
    Total noninterest income 22,230   23,525   18,554   17,095   27,404 
    Total noninterest expense 30,021   30,922   29,107   31,384   35,694 
    Income before income taxes 3,753   5,092   2,782   658   6,776 
    Income tax (benefit) expense 500   1,085   627   (277)  1,506 
    Net income$3,253  $4,007  $2,155  $935  $5,270 
    Income per share – basic$0.16  $0.20  $0.10  $0.04  $0.25 
    Income per share – diluted$0.16  $0.20  $0.10  $0.04  $0.25 
    Dividends declared per common share$0.15  $0.20  $0.20  $0.20  $0.20 
                        
    Performance Ratios (annualized):                   
    Return on average assets - QTD 0.58%  0.74%  0.43%  0.19%  1.08%
    Return on average equity - QTD 3.63%  4.41%  2.35%  0.99%  5.38%
    Net interest margin - QTD 2.26%  2.47%  2.88%  3.29%  3.34%
                        
    Return on average assets - YTD 0.59%  0.59%  0.43%  0.96%  1.22%
    Return on average equity - YTD 3.46%  3.37%  2.35%  4.91%  6.09%
    Net interest margin - YTD 2.53%  2.67%  2.88%  3.00%  2.90%
                        
    Asset Quality Ratios:                   
    Past due loans to total loans 0.53%  0.50%  0.64%  0.41%  0.48%
    Nonaccrual loans to total loans 0.25%  0.26%  0.29%  0.29%  0.37%
    Nonperforming assets to total assets 0.20%  0.19%  0.22%  0.22%  0.27%
    Allowance for credit losses - loans to loans receivable 1.12%  1.14%  1.14%  1.18%  1.29%



    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, 
     2023  2023  2023  2022  2022 
    Average balances(Dollars in Thousands) 
    Interest-earning assets                   
    Loans receivable and held for sale$1,797,233  $1,759,001  $1,654,942  $1,578,790  $1,492,462 
    Mortgage related securities 174,202   171,938   170,218   170,209   172,807 
    Debt securities, federal funds sold and short-term investments 132,935   123,195   115,962   130,973   162,211 
    Total interest-earning assets 2,104,370   2,054,134   1,941,122   1,879,972   1,827,480 
    Noninterest-earning assets 105,714   108,320   107,009   122,643   114,274 
    Total assets$2,210,084  $2,162,454  $2,048,131  $2,002,615  $1,941,754 
                        
    Interest-bearing liabilities                   
    Demand accounts$90,623  $69,147  $68,564  $75,449  $75,058 
    Money market, savings, and escrow accounts 306,806   305,576   322,220   349,820   398,643 
    Certificates of deposit 719,708   695,310   648,531   628,375   586,012 
    Total interest-bearing deposits 1,117,137   1,070,033   1,039,315   1,053,644   1,059,713 
    Borrowings 584,764   551,545   441,716   333,249   296,111 
    Total interest-bearing liabilities 1,701,901   1,621,578   1,481,031   1,386,893   1,355,824 
    Noninterest-bearing demand deposits 106,042   130,291   143,296   177,217   153,591 
    Noninterest-bearing liabilities 46,805   46,446   51,840   63,866   43,683 
    Total liabilities 1,854,748   1,798,315   1,676,167   1,627,976   1,553,098 
    Equity 355,336   364,139   371,964   374,639   388,656 
    Total liabilities and equity$2,210,084  $2,162,454  $2,048,131  $2,002,615  $1,941,754 
                        
    Average Yield/Costs (annualized)                   
    Loans receivable and held for sale 5.26%  5.05%  4.87%  4.69%  4.32%
    Mortgage related securities 2.41%  2.26%  2.25%  2.13%  2.07%
    Debt securities, federal funds sold and short-term investments 4.45%  3.67%  3.71%  3.35%  2.41%
    Total interest-earning assets 4.97%  4.73%  4.57%  4.36%  3.93%
                        
    Demand accounts 0.11%  0.09%  0.08%  0.08%  0.08%
    Money market and savings accounts 1.54%  1.42%  1.26%  0.67%  0.21%
    Certificates of deposit 3.43%  2.80%  1.92%  1.10%  0.51%
    Total interest-bearing deposits 2.64%  2.23%  1.60%  0.89%  0.37%
    Borrowings 4.71%  4.08%  3.68%  3.23%  2.34%
    Total interest-bearing liabilities 3.35%  2.86%  2.22%  1.45%  0.80%



    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, 
     2023  2023  2023  2022  2022 
     (Dollars in Thousands) 
    Condensed Results of Operations:                   
    Net interest income$12,431  $13,238  $14,008  $15,737  $15,507 
    Provision for credit losses 445   158   388   624   234 
    Total noninterest income 966   1,540   987   1,033   1,116 
    Noninterest expenses:                   
    Compensation, payroll taxes, and other employee benefits 4,618   4,683   5,168   4,781   4,424 
    Occupancy, office furniture and equipment 852   873   1,031   877   955 
    Advertising 200   230   184   203   213 
    Data processing 672   602   601   551   539 
    Communications 70   72   78   92   108 
    Professional fees 176   146   218   153   123 
    Real estate owned 1   1   1   13   1 
    Loan processing expense -   -   -   -   - 
    Other 703   1,641   896   2,468   1,477 
    Total noninterest expense 7,292   8,248   8,177   9,138   7,840 
    Income before income taxes 5,660   6,372   6,430   7,008   8,549 
    Income tax expense 1,121   1,182   1,600   1,308   1,983 
    Net income$4,539  $5,190  $4,830  $5,700  $6,566 
                        
    Efficiency ratio - QTD (non-GAAP) 54.43%  55.81%  54.53%  54.49%  47.16%
    Efficiency ratio - YTD (non-GAAP) 54.94%  55.17%  54.53%  52.10%  51.20%



    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, 
     2023  2023  2023  2022  2022 
     (Dollars in Thousands) 
    Condensed Results of Operations:                   
    Net interest loss$(550) $(622) $(282) $(241) $(155)
    Provision for credit losses -   28   72   40   98 
    Total noninterest income 21,452   23,041   17,951   18,066   27,305 
    Noninterest expenses:                   
    Compensation, payroll taxes, and other employee benefits 17,186   17,929   15,099   17,397   21,864 
    Occupancy, office furniture and equipment 1,141   1,173   1,232   1,289   1,341 
    Advertising 716   714   705   769   924 
    Data processing 551   480   516   490   543 
    Communications 173   153   173   197   194 
    Professional fees 564   466   188   453   265 
    Real estate owned -   -   -   -   - 
    Loan processing expense 722   932   1,018   1,059   1,120 
    Other 1,935   1,914   2,403   2,584   2,571 
    Total noninterest expense 22,988   23,761   21,334   24,238   28,822 
    Loss before income taxes (2,086)  (1,370)  (3,737)  (6,453)  (1,770)
    Income tax benefit (657)  (126)  (1,002)  (1,602)  (470)
    Net loss$(1,429) $(1,244) $(2,735) $(4,851) $(1,300)
                        
    Efficiency ratio - QTD (non-GAAP) 109.98%  105.99%  120.74%  135.98%  106.16%
    Efficiency ratio - YTD (non-GAAP) 111.63%  112.49%  120.74%  104.02%  97.42%
                        
    Loan originations$597,562  $623,342  $442,710  $546,628  $729,897 
    Purchase 95.4%  96.4%  96.5%  95.6%  94.2%
    Refinance 4.6%  3.6%  3.5%  4.4%  5.8%
    Gross margin on loans sold(1) 3.62%  3.73%  3.78%  3.41%  3.70%

    (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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