• Waterstone Financial, Inc. Announces Results of Operations for the Quarter and Year Ended December 31, 2022

    Source: Nasdaq GlobeNewswire / 26 Jan 2023 16:09:34   America/New_York

    WAUWATOSA, Wis., Jan. 26, 2023 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $935,000, or $0.04 per diluted share for the quarter ended December 31, 2022 compared to $12.6 million, or $0.53 per diluted share for the quarter ended December 31, 2021. Net income per diluted share was $0.89 for the twelve months ended December 31, 2022 compared to net income per diluted share of $2.96 for the twelve months ended December 31, 2021.

    “The quarter was mixed as the community banking segment continued to achieve excellent loan growth while the mortgage banking segment lagged with lower volumes and declining margins,” said Douglas Gordon, Chief Executive Officer of Waterstone Financial, Inc. “Net interest income grew in the quarter as we added $156.0 million to the loan portfolio and efficiently used our cash as interest rates continued to rise. The mortgage banking segment continues to face significant challenges as a result of increases in mortgage rates year-over-year and the decline in affordable housing inventories. We are focused on controlling expenses and being prepared to capitalize when the mortgage market improves.”

    Highlights of the Quarter Ended December 31, 2022

    Waterstone Financial, Inc. (Consolidated)

    ●Consolidated net income of Waterstone Financial, Inc. totaled $935,000 for the quarter ended December 31, 2022, compared to $12.6 million for the quarter ended December 31, 2021.
    ●Consolidated return on average assets was 0.19% for the quarter ended December 31, 2022 compared to 2.22% for the quarter ended December 31, 2021.
    ●Consolidated return on average equity was 0.99% for the quarter ended December 31, 2022 and 11.14% for the quarter ended December 31, 2021.
    ●Dividends declared during the quarter ended December 31, 2022 totaled $0.20 per common share.
    ●We repurchased approximately 159,000 shares at a cost of $2.6 million, or $16.53 per share, during the quarter ended December 31, 2022.
    ●Nonperforming assets as percentage of total assets was 0.22% at December 31, 2022, 0.27% at September 30, 2022, and 0.26% at December 31, 2021.
    ●Past due loans as percentage of total loans was 0.41% at December 31, 2022, 0.48% at September 30, 2022, and 0.59% at December 31, 2021.
    ●Book value per share was $16.71 at December 31, 2022 and $17.45 at December 31, 2021.  The decrease reflects an $0.79 per share impact resulting from an increase in the unrealized loss on available for sale securities. 
      

    Community Banking Segment

    ●Pre-tax income totaled $7.0 million for the quarter ended December 31, 2022, which represents a $1.4 million, or 16.4%, decrease compared to $8.4 million for the quarter ended December 31, 2021.
    ●Net interest income totaled $15.7 million for the quarter ended December 31, 2022, which represents a $2.5 million, or 19.2%, increase compared to $13.2 million for the quarter ended December 31, 2021.
    ●Average loans held for investment totaled $1.41 billion during the quarter ended December 31, 2022, which represents an increase of $201.9 million, or 16.7%, compared to $1.21 billion for the quarter ended December 31, 2021. Average loans held for investment increased $102.1 million compared to $1.31 billion for the quarter ended September 30, 2022.
    ●The community banking segment purchased $112.0 million adjustable-rate loans that were originated by the mortgage banking segment during the quarter ended December 31, 2022. Other noninterest expense includes fees totaling $2.0 million during the quarter ended December 31, 2022 which were paid to the mortgage banking segment and eliminated on a consolidated basis.  
    ●Net interest margin increased 82 basis points to 3.29% for the quarter ended December 31, 2022 compared to 2.47% for the quarter ended December 31, 2021, which was a result of a decrease in the average balance of cash, as funds were utilized to fund loans held for investment, 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 decreased five basis points compared to 3.34% for the quarter ended September 30, 2022, 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 - loans of $290,000 for the quarter ended December 31, 2022 compared to a negative provision for loan losses of $1.5 million for the quarter ended December 31, 2021. The current quarter increase was primarily due to an increase in loans held for investment during the quarter. The provision for credit losses - unfunded commitments was $334,000 as the loan pipeline increased from the prior quarter end.   
    ●The efficiency ratio was 54.49% for the quarter ended December 31, 2022, compared to 53.02% for the quarter ended December 31, 2021.
    ●Average deposits (excluding escrow accounts) totaled $1.21 billion during the quarter ended December 31, 2022, a decrease of $35.3 million, or 2.8%, compared to $1.25 billion during the quarter ended December 31, 2021. Average deposits increased $18.1 million, or 6.1% annualized compared to the $1.19 billion for the quarter ended September 30, 2022 due to an increase in certificate of deposits rates attracting more customers.  
    ●Other noninterest expense increased $1.8 million to $2.5 million during the quarter ended December 31, 2022 compared to $651,000 during the quarter ended December 31, 2021. The increase was driven by fees paid to the mortgage banking segment for the purchase of single-family adjustable rate mortgage loans.  See the note on the loans purchased from the mortgage banking segment above. These fees are eliminated in the consolidated statements of income.
      

    Mortgage Banking Segment

    ●Pre-tax loss totaled $6.5 million for the quarter ended December 31, 2022, compared to $7.3 million of pre-tax income for the quarter ended December 31, 2021.
    ●Loan originations decreased $446.5 million, or 45.0%, to $546.6 million during the quarter ended December 31, 2022, compared to $993.1 million during the quarter ended December 31, 2021. Origination volume relative to purchase activity accounted for 95.6% of originations for the quarter ended December 31, 2022 compared to 73.8% of total originations for the quarter ended December 31, 2021.
    ●Mortgage banking non-interest income decreased $22.6 million, or 55.6%, to $18.1 million for the quarter ended December 31, 2022, compared to $40.7 million for the quarter ended December 31, 2021.
    ●Gross margin on loans sold decreased to 3.41% for the quarter ended December 31, 2022, compared to 4.18% for the quarter ended December 31, 2021.  
    ●Total compensation, payroll taxes and other employee benefits decreased $10.5 million, or 37.6%, to $17.4 million during the quarter ended December 31, 2022 compared to $27.9 million during the quarter ended December 31, 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 $1.1 million to $2.6 million during the quarter ended December 31, 2022 compared to $1.4 million during the quarter ended December 31, 2021. The increase related to an increase in provision of loan sale losses.
    ●During the year ended December 31, 2022 the segment has added 11 branches and a total of 130 loan origination personnel.  Losses associated with these new branches totaled approximately $725,000 for the quarter ended December 31, 2022 and $1.9 million for the year ended December 31, 2022. These branch losses are net of corporate revenue of approximately $641,000 for the quarter ended December 31, 2022 and $1.2 million for the year ended December 31, 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 December 31,  For The Twelve Months Ended December 31, 
      2022  2021  2022  2021 
      (In Thousands, except per share amounts) 
    Interest income:                
    Loans $18,654  $15,152  $62,935  $64,366 
    Mortgage-related securities  915   506   3,241   1,954 
    Debt securities, federal funds sold and short-term investments  1,105   926   4,069   3,563 
    Total interest income  20,674   16,584   70,245   69,883 
    Interest expense:                
    Deposits  2,352   878   4,863   4,420 
    Borrowings  2,711   2,534   8,428   9,948 
    Total interest expense  5,063   3,412   13,291   14,368 
    Net interest income  15,611   13,172   56,954   55,515 
    Provision (credit) for credit losses (1)  664   (1,470)  968   (3,990)
    Net interest income after provision for loan losses  14,947   14,642   55,986   59,505 
    Noninterest income:                
    Service charges on loans and deposits  497   842   2,202   3,325 
    Increase in cash surrender value of life insurance  344   318   1,738   1,615 
    Mortgage banking income  15,811   40,448   99,560   191,035 
    Other  443   408   2,055   7,220 
    Total noninterest income  17,095   42,016   105,555   203,195 
    Noninterest expenses:                
    Compensation, payroll taxes, and other employee benefits  22,063   32,837   99,565   135,115 
    Occupancy, office furniture, and equipment  2,166   2,266   8,706   9,612 
    Advertising  972   958   3,976   3,528 
    Data processing  1,040   1,079   4,470   3,950 
    Communications  289   321   1,189   1,309 
    Professional fees  612   471   1,815   1,275 
    Real estate owned  13   14   19   3 
    Loan processing expense  1,059   940   4,744   4,610 
    Other  3,170   2,088   12,578   11,192 
    Total noninterest expenses  31,384   40,974   137,062   170,594 
    Income before income taxes  658   15,684   24,479   92,106 
    Income tax (benefit) expense  (277)  3,131   4,992   21,315 
    Net income $935  $12,553  $19,487  $70,791 
    Income per share:                
    Basic $0.04  $0.53  $0.89  $2.98 
    Diluted $0.04  $0.53  $0.89  $2.96 
    Weighted average shares outstanding:                
    Basic  20,966   23,598   21,884   23,741 
    Diluted  21,069   23,802   22,010   23,931 


      December 31,  December 31, 
      2022  2021 
      (Unaudited)     
    Assets (In Thousands, except per share amounts) 
    Cash $33,700  $343,016 
    Federal funds sold  10,683   13,981 
    Interest-earning deposits in other financial institutions and other short-term investments  2,259   19,725 
    Cash and cash equivalents  46,642   376,722 
    Securities available for sale (at fair value)  196,588   179,016 
    Loans held for sale (at fair value)  131,188   312,738 
    Loans receivable  1,510,178   1,205,785 
    Less: Allowance for credit losses ("ACL") - loans (1)  17,757   15,778 
    Loans receivable, net  1,492,421   1,190,007 
             
    Office properties and equipment, net  21,105   22,273 
    Federal Home Loan Bank stock (at cost)  17,357   24,438 
    Cash surrender value of life insurance  66,443   65,368 
    Real estate owned, net  145   148 
    Prepaid expenses and other assets  59,783   45,148 
    Total assets $2,031,672  $2,215,858 
             
    Liabilities and Shareholders' Equity        
    Liabilities:        
    Demand deposits $230,596  $214,409 
    Money market and savings deposits  326,145   392,314 
    Time deposits  642,271   626,663 
    Total deposits  1,199,012   1,233,386 
             
    Borrowings  386,784   477,127 
    Advance payments by borrowers for taxes  5,334   4,094 
    Other liabilities  70,056   68,478 
    Total liabilities  1,661,186   1,783,085 
             
    Shareholders' equity:        
    Preferred stock  -   - 
    Common stock  222   248 
    Additional paid-in capital  128,550   174,505 
    Retained earnings  274,246   273,398 
    Unearned ESOP shares  (13,056)  (14,243)
    Accumulated other comprehensive loss, net of taxes  (19,476)  (1,135)
    Total shareholders' equity  370,486   432,773 
    Total liabilities and shareholders' equity $2,031,672  $2,215,858 
             
    Share Information        
    Shares outstanding  22,174   24,795 
    Book value per share $16.71  $17.45 
             


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

      At or For the Three Months Ended 
      December 31,  September 30,  June 30,  March 31,  December 31, 
      2022  2022  2022  2022  2021 
      (Dollars in Thousands, except per share amounts) 
    Condensed Results of Operations:                    
    Net interest income $15,611  $15,398  $14,081  $11,864  $13,172 
    Provision (credit) for credit losses (1)  664   332   48   (76)  (1,470)
    Total noninterest income  17,095   27,404   31,238   29,818   42,016 
    Total noninterest expense  31,384   35,694   35,050   34,935   40,974 
    Income before income taxes  658   6,776   10,221   6,823   15,684 
    Income tax (benefit) expense  (277)  1,506   2,231   1,532   3,131 
    Net income $935  $5,270  $7,990  $5,291  $12,553 
    Income per share – basic $0.04  $0.25  $0.36  $0.23  $0.53 
    Income per share – diluted $0.04  $0.25  $0.36  $0.23  $0.53 
    Dividends declared per share $0.20  $0.20  $0.20  $0.20  $0.70 
                         
    Performance Ratios (annualized):                    
    Return on average assets - QTD  0.19%  1.08%  1.61%  1.00%  2.22%
    Return on average equity - QTD  0.99%  5.38%  7.93%  5.00%  11.14%
    Net interest margin - QTD  3.29%  3.34%  3.02%  2.38%  2.47%
                         
    Return on average assets - YTD  0.96%  1.22%  1.30%  1.00%  3.20%
    Return on average equity - YTD  4.91%  6.09%  6.42%  5.00%  16.38%
    Net interest margin - YTD  3.00%  2.90%  2.69%  2.38%  2.68%
                         
    Asset Quality Ratios:                    
    Past due loans to total loans  0.41%  0.48%  0.60%  0.53%  0.59%
    Nonaccrual loans to total loans  0.29%  0.37%  0.59%  0.55%  0.46%
    Nonperforming assets to total assets  0.22%  0.27%  0.39%  0.34%  0.26%
    Allowance for credit losses to loans receivable (1)  1.18%  1.29%  1.35%  1.40%  1.31%

    (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 
      December 31,  September 30,  June 30,  March 31,  December 31, 
      2022  2022  2022  2022  2021 
    Average balances (Dollars in Thousands) 
    Interest-earning assets                    
    Loans receivable and held for sale $1,578,790  $1,492,462  $1,433,452  $1,361,839  $1,517,984 
    Mortgage related securities  170,209   172,807   168,000   138,863   119,709 
    Debt securities, federal funds sold and short term investments  130,973   162,211   269,823   519,116   475,574 
    Total interest-earning assets  1,879,972   1,827,480   1,871,275   2,019,818   2,113,267 
    Noninterest-earning assets  122,643   114,274   117,248   128,813   131,703 
    Total assets $2,002,615  $1,941,754  $1,988,523  $2,148,631  $2,244,970 
                         
    Interest-bearing liabilities                    
    Demand accounts $75,449  $75,058  $70,674  $69,736  $70,762 
    Money market, savings, and escrow accounts  349,820   398,643   412,321   404,413   398,210 
    Certificates of deposit  628,375   586,012   584,244   610,681   643,546 
    Total interest-bearing deposits  1,053,644   1,059,713   1,067,239   1,084,830   1,112,518 
    Borrowings  333,249   296,111   326,068   440,252   481,971 
    Total interest-bearing liabilities  1,386,893   1,355,824   1,393,307   1,525,082   1,594,489 
    Noninterest-bearing demand deposits  177,217   153,591   154,070   152,900   153,303 
    Noninterest-bearing liabilities  63,866   43,683   36,962   41,232   49,982 
    Total liabilities  1,627,976   1,553,098   1,584,339   1,719,214   1,797,774 
    Equity  374,639   388,656   404,184   429,417   447,196 
    Total liabilities and equity $2,002,615  $1,941,754  $1,988,523  $2,148,631  $2,244,970 
                         
    Average Yield/Costs (annualized)                    
    Loans receivable and held for sale  4.69%  4.32%  4.07%  4.02%  3.96%
    Mortgage related securities  2.13%  2.07%  1.96%  1.76%  1.68%
    Debt securities, federal funds sold and short term investments  3.35%  2.41%  1.56%  0.72%  0.77%
    Total interest-earning assets  4.36%  3.93%  3.52%  3.02%  3.11%
                         
    Demand accounts  0.08%  0.08%  0.09%  0.08%  0.08%
    Money market and savings accounts  0.67%  0.21%  0.19%  0.21%  0.22%
    Certificates of deposit  1.10%  0.51%  0.37%  0.37%  0.40%
    Total interest-bearing deposits  0.89%  0.37%  0.28%  0.29%  0.31%
    Borrowings  3.23%  2.34%  1.95%  2.20%  2.09%
    Total interest-bearing liabilities  1.45%  0.80%  0.67%  0.84%  0.85%
                         


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

      At or For the Three Months Ended 
      December 31,  September 30,  June 30,  March 31,  December 31, 
      2022  2022  2022  2022  2021 
      (Dollars in Thousands) 
    Condensed Results of Operations:                    
    Net interest income $15,737  $15,507  $13,710  $11,652  $13,197 
    Provision (credit) for credit losses (1)  624   234   (41)  (140)  (1,500)
    Total noninterest income  1,033   1,116   1,640   1,432   1,459 
    Noninterest expenses:                    
    Compensation, payroll taxes, and other employee benefits  4,781   4,424   4,596   5,212   5,085 
    Occupancy, office furniture and equipment  877   955   876   937   960 
    Advertising  203   213   244   227   278 
    Data processing  551   539   531   608   531 
    Communications  92   108   63   94   100 
    Professional fees  153   123   118   114   151 
    Real estate owned  13   1   -   5   14 
    Loan processing expense  -   -   -   -   - 
    Other  2,468   1,477   1,006   600   651 
    Total noninterest expense  9,138   7,840   7,434   7,797   7,770 
    Income before income taxes  7,008   8,549   7,957   5,427   8,386 
    Income tax expense  1,308   1,983   1,658   1,167   1,690 
    Net income $5,700  $6,566  $6,299  $4,260  $6,696 
                         
    Efficiency ratio - QTD  54.49%  47.16%  48.43%  59.59%  53.02%
    Efficiency ratio - YTD  52.10%  51.20%  53.57%  59.59%  48.58%

    (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 
      December 31,  September 30,  June 30,  March 31,  December 31, 
      2022  2022  2022  2022  2021 
      (Dollars in Thousands) 
    Condensed Results of Operations:                    
    Net interest (loss) income $(241) $(155) $370  $183  $(49)
    Provision for credit losses (2)  40   98   89   64   30 
    Total noninterest income  18,066   27,305   30,126   28,604   40,692 
    Noninterest expenses:                    
    Compensation, payroll taxes, and other employee benefits  17,397   21,864   21,311   20,438   27,866 
    Occupancy, office furniture and equipment  1,289   1,341   1,180   1,251   1,306 
    Advertising  769   924   718   678   680 
    Data processing  490   543   613   588   542 
    Communications  197   194   195   246   221 
    Professional fees  453   265   222   338   306 
    Real estate owned  -   -   -   -   - 
    Loan processing expense  1,059   1,120   1,134   1,431   940 
    Other  2,584   2,571   2,733   2,309   1,445 
    Total noninterest expense  24,238   28,822   28,106   27,279   33,306 
    (Loss) income before income taxes  (6,453)  (1,770)  2,301   1,444   7,307 
    Income tax (benefit) expense  (1,602)  (470)  578   377   1,443 
    Net (loss) income $(4,851) $(1,300) $1,723  $1,067  $5,864 
                         
    Efficiency ratio - QTD  135.98%  106.16%  92.16%  94.76%  81.95%
    Efficiency ratio - YTD  104.02%  97.42%  93.42%  94.76%  71.44%
                         
    Loan originations $546,628  $729,897  $778,760  $708,463  $993,113 
    Purchase  95.6%  94.2%  90.4%  77.3%  73.8%
    Refinance  4.4%  5.8%  9.6%  22.7%  26.2%
    Gross margin on loans sold(1)  3.41%  3.70%  3.85%  4.00%  4.18%

    (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
    markgerke@wsbonline.com


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