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

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WAUWATOSA, Wis., April 23, 2019 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (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. Gerke
Chief Financial Officer
414.459.4012
markgerke@wsbonline.com