Waterstone Financial, Inc. Announces Results of Operations

WAUWATOSA, Wis., July 21, 2022 (GLOBE NEWSWIRE) — Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $8.0 million, or $0.36 per diluted share for the quarter ended June 30, 2022 compared to $17.9 million, or $0.74 per diluted share for the quarter ended June 30, 2021. Net income per diluted share was $0.58 for the six months ended June 30, 2022 compared to net income per diluted share of $1.64 for the six months ended June 30, 2021.

“The community banking segment achieved strong loan growth, specifically in the commercial real estate market,” said Douglas Gordon, Chief Executive Officer of Waterstone Financial, Inc. “We were able to reduce our borrowings and fund our loan growth through the deposits that we have raised over the past few years. The mortgage banking segment continues to focus on efficiencies to remain profitable, as origination volumes decreased in response to higher interest rates. Additionally, we were able to continue returning strong shareholder value through our largest quarterly stock buyback since 2015.”

Highlights of the Quarter Ended June 30, 2022

Waterstone Financial, Inc. (Consolidated)

  • Consolidated net income of Waterstone Financial, Inc. totaled $8.0 million for the quarter ended June 30, 2022, compared to $17.9 million for the quarter ended June 30, 2021.
  • Consolidated return on average assets was 1.61% for the quarter ended June 30, 2022 compared to 3.25% for the quarter ended June 30, 2021.
  • Consolidated return on average equity was 7.93% for the quarter ended June 30, 2022 and 16.49% for the quarter ended June 30, 2021.
  • Dividends declared during the quarter ended June 30, 2022 totaled $0.20 per common share.
  • We repurchased approximately 1.4 million shares at a cost of $24.2 million, or $17.07 per share, during the quarter ended June 30, 2022.
  • Nonperforming assets as percentage of total assets was 0.39% at June 30, 2022, 0.34% at March 31, 2022, and 0.20% at June 30, 2021.
  • Past due loans as percentage of total loans was 0.60% at June 30, 2022, 0.53% at March 31, 2022, and 0.53% at June 30, 2021.

Community Banking Segment

  • Pre-tax income totaled $8.0 million for the quarter ended June 30, 2022, which represents a $1.7 million, or 17.7%, decrease compared to $9.7 million for the quarter ended June 30, 2021.
  • Net interest income totaled $13.7 million for the quarter ended June 30, 2022, which represents an $807,000, or 5.6%, decrease compared to $14.5 million for the quarter ended June 30, 2021.
  • Average loans held for investment totaled $1.25 billion during the quarter ended June 30, 2022, which represents a decrease of $72.1 million, or 5.5%, compared to $1.32 billion for the quarter ended June 30, 2021. Average loans held for investment increased $42.5 million compared to $1.20 billion for the quarter ended March 31, 2022.
  • Net interest margin increased 24 basis points to 3.02% for the quarter ended June 30, 2022 compared to 2.78% for the quarter ended June 30, 2021, which was a result of a decrease in the average balance of cash, as funds were utilized to purchase investment securities and pay down borrowings. In addition, yields increased on loans receivable, loans held for sale, mortgage related securities, debt securities, federal funds sold and short term investments category. Net interest margin increased 64 basis points compared to 2.38% for the quarter ended March 31, 2022, driven by an increase in average loan balance, weighted average yield on loans, and weighted average yield on average debt securities, federal funds sold and short term investments. In addition, excess cash was utilized to pay down borrowings.
  • The segment had a negative provision for credit losses of $41,000 for the quarter ended June 30, 2022 compared to a negative provision for loan losses of $750,000 for the quarter ended June 30, 2021.
  • Net recoveries totaled $107,000 for the quarter ended June 30, 2022, as one significant loan recovery payment was received during the quarter, compared to net recoveries of $378,000 for the quarter ended June 30, 2021. With the adoption of CECL, estimated recoveries may be accounted for within the calculation and do not impact the provision for credit losses line item when cash is received.
  • The efficiency ratio was 48.43% for the quarter ended June 30, 2022, compared to 44.79% for the quarter ended June 30, 2021.
  • Average deposits (excluding escrow accounts) totaled $1.21 billion during the quarter ended June 30, 2022, an increase of $1.2 million, or 0.1%, compared to $1.21 billion during the quarter ended June 30, 2021. Average deposits decreased $22.9 million, or 7.5% annualized compared to the $1.23 billion for the quarter ended March 31, 2022.

Mortgage Banking Segment

  • Pre-tax income totaled $2.3 million for the quarter ended June 30, 2022, compared to $14.2 million for the quarter ended June 30, 2021.
  • Loan originations decreased $286.4 million, or 26.9%, to $778.8 million during the quarter ended June 30, 2022, compared to $1.07 billion during the quarter ended June 30, 2021. Origination volume relative to purchase activity accounted for 90.4% of originations for the quarter ended June 30, 2022 compared to 75.4% of total originations for the quarter ended June 30, 2021.
  • Mortgage banking non-interest income decreased $20.4 million, or 40.4%, to $30.1 million for the quarter ended June 30, 2022, compared to $50.6 million for the quarter ended June 30, 2021.
  • Gross margin on loans sold decreased to 3.76% for the quarter ended June 30, 2022, compared to 4.81% for the quarter ended June 30, 2021.
  • Total compensation, payroll taxes and other employee benefits decreased $7.9 million, or 26.9%, to $21.3 million during the quarter ended June 30, 2022 compared to $29.2 million during the quarter ended June 30, 2021. The decrease primarily related to decreased commission expense and branch manager compensation driven by decreased loan origination volume and branch profitability as gross margins decreased.
  • Other noninterest expense increased $55,000 to $2.7 million during the quarter ended June 30, 2022 compared to $2.7 million during the quarter ended June 30, 2021. The increase related to an increase in provision of loan sale losses offset by a decrease in mortgage servicing rights amortization expense.
  • During the quarter ended June 30, 2022, the segment opened five new branches. Direct start up expenses related to these branches totaled approximately $510,000 for the quarter ended June 30, 2022.

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, including significant disruption to financial market and other economic activity caused by the outbreak of COVID-19; 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.

 
WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
  For The Three Months Ended June 30, For The Six Months Ended June 30,
  2022 2021 2022 2021
  (In Thousands, except per share amounts)
Interest income:        
Loans $ 14,546   $ 16,480   $ 28,046   $ 33,083  
Mortgage-related securities   821     486     1,423     977  
Debt securities, federal funds sold and short-term investments   1,049     858     1,977     1,733  
Total interest income   16,416     17,824     31,446     35,793  
Interest expense:        
Deposits   751     1,078     1,530     2,595  
Borrowings   1,584     2,469     3,971     4,969  
Total interest expense   2,335     3,547     5,501     7,564  
Net interest income   14,081     14,277     25,945     28,229  
Provision (credit) for credit losses(1)   48     (750 )   (28 )   (1,820 )
Net interest income after provision (credit) for credit losses   14,033     15,027     25,973     30,049  
Noninterest income:        
Service charges on loans and deposits   666     657     1,176     1,347  
Increase in cash surrender value of life insurance   724     684     1,040     985  
Mortgage banking income   29,410     49,649     57,685     104,040  
Other   438     1,054     1,155     1,871  
Total noninterest income   31,238     52,044     61,056     108,243  
Noninterest expenses:        
Compensation, payroll taxes, and other employee benefits   25,793     33,926     51,328     68,049  
Occupancy, office furniture, and equipment   2,056     2,293     4,244     4,858  
Advertising   962     911     1,867     1,735  
Data processing   1,144     914     2,346     1,885  
Communications   258     326     598     657  
Professional fees   349     569     810     254  
Real estate owned           5     (12 )
Loan processing expense   1,134     1,200     2,565     2,535  
Other   3,354     3,158     6,221     6,336  
Total noninterest expenses   35,050     43,297     69,984     86,297  
Income before income taxes   10,221     23,774     17,045     51,995  
Income tax expense   2,231     5,880     3,763     12,757  
Net income $ 7,990   $ 17,894   $ 13,282   $ 39,238  
Income per share:        
Basic $ 0.36   $ 0.75   $ 0.59   $ 1.65  
Diluted $ 0.36   $ 0.74   $ 0.58   $ 1.64  
Weighted average shares outstanding:        
Basic   22,126     23,848     22,626     23,792  
Diluted   22,229     24,029     22,768     23,996  
         
(1) The Company adopted ASU 2016-13 as of January 1, 2022. The 2021 amount presented is calculated under the prior accounting standard.
         
 
WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
  June 30, December 31,
  2022 2021
  (Unaudited)  
Assets (In Thousands, except per share amounts)
Cash $ 87,393   $ 343,016  
Federal funds sold   15,093     13,981  
Interest-earning deposits in other financial institutions and other short term investments   19,707     19,725  
Cash and cash equivalents   122,193     376,722  
Securities available for sale (at fair value)   200,545     179,016  
Loans held for sale (at fair value)   206,702     312,738  
Loans receivable   1,276,560     1,205,785  
Less: Allowance for credit losses(1)   17,271     15,778  
Loans receivable, net   1,259,289     1,190,007  
     
Office properties and equipment, net   21,781     22,273  
Federal Home Loan Bank stock (at cost)   16,301     24,438  
Cash surrender value of life insurance   65,745     65,368  
Real estate owned, net   148     148  
Prepaid expenses and other assets   48,393     45,148  
Total assets $ 1,941,097   $ 2,215,858  
     
Liabilities and Shareholders’ Equity    
Liabilities:    
Demand deposits $ 230,003   $ 214,409  
Money market and savings deposits   395,229     392,314  
Time deposits   587,998     626,663  
Total deposits   1,213,230     1,233,386  
     
Borrowings   281,100     477,127  
Advance payments by borrowers for taxes   17,302     4,094  
Other liabilities   43,085     68,478  
Total liabilities   1,554,717     1,783,085  
     
Shareholders’ equity:    
Preferred stock        
Common stock   227     248  
Additional paid-in capital   137,547     174,505  
Retained earnings   276,444     273,398  
Unearned ESOP shares   (13,650 )   (14,243 )
Accumulated other comprehensive loss, net of taxes   (14,188 )   (1,135 )
Total shareholders’ equity   386,380     432,773  
Total liabilities and shareholders’ equity $ 1,941,097   $ 2,215,858  
     
Share Information    
Shares outstanding   22,734     24,795  
Book value per share $ 17.00   $ 17.45  
     
(1) The Company adopted ASU 2016-13 as of January 1, 2022. The 2021 amount presented is calculated under the prior accounting standard.
     
 
WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
           
  At or For the Three Months Ended
  June 30, March 31, December 31, September 30, June 30,
  2022 2022 2021 2021 2021
  (Dollars in Thousands, except per share amounts)
Condensed Results of Operations:          
Net interest income $ 14,081   $ 11,864   $ 13,172   $ 14,114   $ 14,277  
Provision (credit) for credit losses(1)   48     (76 )   (1,470 )   (700 )   (750 )
Total noninterest income   31,238     29,818     42,016     52,936     52,044  
Total noninterest expense   35,050     34,935     40,974     43,323     43,297  
Income before income taxes   10,221     6,823     15,684     24,427     23,774  
Income tax expense   2,231     1,532     3,131     5,427     5,880  
Net income $ 7,990   $ 5,291   $ 12,553   $ 19,000   $ 17,894  
Income per share – basic $ 0.36   $ 0.23   $ 0.53   $ 0.80   $ 0.75  
Income per share – diluted $ 0.36   $ 0.23   $ 0.53   $ 0.79   $ 0.74  
Dividends declared per share $ 0.20   $ 0.20   $ 0.70   $ 0.20   $ 0.70  
           
Performance Ratios (annualized):          
Return on average assets – QTD   1.61 %   1.00 %   2.22 %   3.38 %   3.25 %
Return on average equity – QTD   7.93 %   5.00 %   11.14 %   17.25 %   16.49 %
Net interest margin – QTD   3.02 %   2.38 %   2.47 %   2.68 %   2.78 %
           
Return on average assets – YTD   1.30 %   1.00 %   3.20 %   3.54 %   3.62 %
Return on average equity – YTD   6.42 %   5.00 %   16.38 %   18.08 %   18.49 %
Net interest margin – YTD   2.69 %   2.38 %   2.68 %   2.75 %   2.79 %
           
Asset Quality Ratios:          
Past due loans to total loans   0.60 %   0.53 %   0.59 %   0.92 %   0.53 %
Nonaccrual loans to total loans   0.59 %   0.55 %   0.46 %   0.32 %   0.34 %
Nonperforming assets to total assets   0.39 %   0.34 %   0.26 %   0.18 %   0.20 %
Allowance for loan losses to loans receivable   1.35 %   1.40 %   1.31 %   1.37 %   1.34 %
           
(1) The Company adopted ASU 2016-13 as of January 1, 2022. The 2021 amounts presented are calculated under the prior accounting standard.
           
 
WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF QUARTERLY AVERAGE BALANCES AND YIELD/COSTS
(Unaudited)
           
  At or For the Three Months Ended
  June 30, March 31, December 31, September 30, June 30,
  2022 2022 2021 2021 2021
Average balances (Dollars in Thousands)
Interest-earning assets          
Loans receivable and held for sale $ 1,433,452   $ 1,361,839   $ 1,517,984   $ 1,573,194   $ 1,655,078  
Mortgage related securities   168,000     138,863     119,709     108,743     100,056  
Debt securities, federal funds sold and short term investments   269,823     519,116     475,574     409,559     308,105  
Total interest-earning assets   1,871,275     2,019,818     2,113,267     2,091,496     2,063,239  
Noninterest-earning assets   117,248     128,813     131,703     137,454     143,375  
Total assets $ 1,988,523   $ 2,148,631   $ 2,244,970   $ 2,228,950   $ 2,206,614  
           
Interest-bearing liabilities          
Demand accounts $ 70,674   $ 69,736   $ 70,762   $ 68,478   $ 63,610  
Money market, savings, and escrow accounts   412,321     404,413     398,210     391,599     350,270  
Certificates of deposit   584,244     610,681     643,546     663,343     690,196  
Total interest-bearing deposits   1,067,239     1,084,830     1,112,518     1,123,420     1,104,076  
Borrowings   326,068     440,252     481,971     475,000     480,054  
Total interest-bearing liabilities   1,393,307     1,525,082     1,594,489     1,598,420     1,584,130  
Noninterest-bearing demand deposits   154,070     152,900     153,303     153,436     141,648  
Noninterest-bearing liabilities   36,962     41,232     49,982     40,148     45,658  
Total liabilities   1,584,339     1,719,214     1,797,774     1,792,004     1,771,436  
Equity   404,184     429,417     447,196     436,946     435,178  
Total liabilities and equity $ 1,988,523   $ 2,148,631   $ 2,244,970   $ 2,228,950   $ 2,206,614  
           
Average Yield/Costs (annualized)          
Loans receivable and held for sale   4.07 %   4.02 %   3.96 %   4.07 %   3.99 %
Mortgage related securities   1.96 %   1.76 %   1.68 %   1.72 %   1.95 %
Debt securities, federal funds sold and short term investments   1.56 %   0.72 %   0.77 %   0.88 %   1.12 %
Total interest-earning assets   3.52 %   3.02 %   3.11 %   3.32 %   3.47 %
           
Demand accounts   0.09 %   0.08 %   0.08 %   0.08 %   0.08 %
Money market and savings accounts   0.19 %   0.21 %   0.22 %   0.24 %   0.23 %
Certificates of deposit   0.37 %   0.37 %   0.40 %   0.42 %   0.50 %
Total interest-bearing deposits   0.28 %   0.29 %   0.31 %   0.33 %   0.39 %
Borrowings   1.95 %   2.20 %   2.09 %   2.04 %   2.06 %
Total interest-bearing liabilities   0.67 %   0.84 %   0.85 %   0.84 %   0.90 %
           
 
COMMUNITY BANKING SEGMENT
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
           
  At or For the Three Months Ended
  June 30, March 31, December 31, September 30, June 30,
  2022 2022 2021 2021 2021
  (Dollars in Thousands)
Condensed Results of Operations:          
Net interest income $ 13,710   $ 11,652   $ 13,197   $ 14,090   $ 14,517  
Provision (credit) for credit losses(1)   (41 )   (140 )   (1,500 )   (750 )   (750 )
Total noninterest income   1,640     1,432     1,459     1,726     1,630  
Noninterest expenses:          
Compensation, payroll taxes, and other employee benefits   4,596     5,212     5,085     5,360     4,874  
Occupancy, office furniture and equipment   876     937     960     909     887  
Advertising   244     227     278     233     260  
Data processing   531     608     531     531     466  
Communications   63     94     100     122     86  
Professional fees   118     114     151     130     198  
Real estate owned       5     14     1      
Loan processing expense                    
Other   1,006     600     651     422     461  
Total noninterest expense   7,434     7,797     7,770     7,708     7,232  
Income before income taxes   7,957     5,427     8,386     8,858     9,665  
Income tax expense   1,658     1,167     1,690     2,092     2,128  
Net income $ 6,299   $ 4,260   $ 6,696   $ 6,766   $ 7,537  
           
Efficiency ratio – QTD   48.43 %   59.59 %   53.02 %   48.74 %   44.79 %
Efficiency ratio – YTD   53.57 %   59.59 %   48.58 %   47.21 %   46.44 %
           
(1) The Company adopted ASU 2016-13 as of January 1, 2022. The 2021 amounts presented are calculated under the prior accounting standard.
           

        

 
MORTGAGE BANKING SEGMENT
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
           
  At or For the Three Months Ended
  June 30, March 31, December 31, September 30, June 30,
  2022 2022 2021 2021 2021
  (Dollars in Thousands)
Condensed Results of Operations:          
Net interest income $ 370   $ 183   $ (49 ) $ (2 ) $ (251 )
Provision for credit losses(2)   89     64     30     50      
Total noninterest income   30,126     28,604     40,692     51,290     50,556  
Noninterest expenses:          
Compensation, payroll taxes, and other employee benefits   21,311     20,438     27,866     28,981     29,170  
Occupancy, office furniture and equipment   1,180     1,251     1,306     1,579     1,406  
Advertising   718     678     680     602     651  
Data processing   613     588     542     450     443  
Communications   195     246     221     209     240  
Professional fees   222     338     306     421     361  
Real estate owned                    
Loan processing expense   1,134     1,431     940     1,135     1,200  
Other   2,733     2,309     1,445     2,270     2,678  
Total noninterest expense   28,106     27,279     33,306     35,647     36,149  
Income (loss) before income taxes   2,301     1,444     7,307     15,591     14,156  
Income tax expense (benefit)   578     377     1,443     3,341     3,761  
Net income (loss) $ 1,723   $ 1,067   $ 5,864   $ 12,250   $ 10,395  
           
Efficiency ratio – QTD   92.16 %   94.76 %   81.95 %   69.50 %   71.86 %
Efficiency ratio – YTD   93.42 %   94.76 %   71.44 %   68.71 %   68.32 %
           
Loan originations $ 778,760   $ 708,463   $ 993,113   $ 1,055,500   $ 1,065,161  
Purchase   90.4 %   77.3 %   73.8 %   73.8 %   75.4 %
Refinance   9.6 %   22.7 %   26.2 %   26.2 %   24.6 %
Gross margin on loans sold(1)   3.76 %   4.00 %   4.18 %   4.54 %   4.81 %
(1) Gross margin on loans sold equals mortgage banking income (excluding the change in interest rate lock value) divided by total loan originations
(2) The Company adopted ASU 2016-13 as of January 1, 2022. The 2021 amounts presented are calculated under the prior accounting standard.
           

Contact: Mark R. Gerke

Chief Financial Officer

414-459-4012

[email protected]

Copyright 2022 GlobeNewswire, Inc.

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