• Waterstone Financial, Inc. Announces Results of Operations for the Quarter and Nine Months Ended September 30, 2021

    Source: Nasdaq GlobeNewswire / 19 Oct 2021 15:01:00   America/Chicago

    WAUWATOSA, Wis., Oct. 19, 2021 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $19.0 million, or $0.79 per diluted share for the quarter ended September 30, 2021 compared to $26.3 million, or $1.08 per diluted share for the quarter ended September 30, 2020. Net income per diluted share was $2.43 for the nine months ended September 30, 2021 compared to net income per diluted share of $2.15 for the nine months ended September 30, 2020.

    “We are pleased with the Company’s continued strong financial results during the third quarter,” said Douglas Gordon, Chief Executive Officer of Waterstone Financial, Inc. “We have the right team members to navigate market challenges, as we meet the ever changing demands for our customers. Our results validate the strategies we have implemented over the past years to grow our brands and deliver for our shareholders.”

    Highlights of the Quarter Ended September 30, 2021

    Waterstone Financial, Inc. (Consolidated)

    • Consolidated net income of Waterstone Financial, Inc. totaled $19.0 million for the quarter ended September 30, 2021, compared to $26.3 million for the quarter ended September 30, 2020.
    • Consolidated return on average assets was 3.38% for the quarter ended September 30, 2021 compared to 4.78% for the quarter ended September 30, 2020.
    • Consolidated return on average equity was 17.25% for the quarter ended September 30, 2021 and 26.30% for the quarter ended September 30, 2020.
    • Dividends declared during the quarter ended September 30, 2021 totaled $0.20 per common share.
    • We repurchased approximately 178,000 shares at a cost of $3.5 million during the quarter ended September 30, 2021.

    Community Banking Segment

    • Pre-tax income totaled $8.9 million for the quarter ended September 30, 2021, which represents a $1.1 million, or 14.4%, increase compared to $7.7 million for the quarter ended September 30, 2020.
    • Net interest income totaled $14.1 million for the quarter ended September 30, 2021, which represents a 4.7% increase compared to $13.5 million for the quarter ended September 30, 2020.
    • Average loans held for investment totaled $1.26 billion during the quarter ended September 30, 2021, which represents a decrease of $174.0 million, or 12.2%, compared to $1.43 billion for the quarter ended September 30, 2020. Average loans held for investment decreased $63.8 million compared to $1.32 billion for the quarter ended June 30, 2021 as residential real estate loans continue to prepay at an accelerated rate.
    • Net interest margin increased five basis points to 2.68% for the quarter ended September 30, 2021 compared to 2.63% for the quarter ended September 30, 2020, which was a result of lower average rates on deposits, as certificate of deposits repriced at lower rates. Net interest margin decreased 10 basis points compared to 2.78% for the quarter ended June 30, 2021, driven by a decrease in average loan balance and a higher average cash balance.
    • The segment had a negative provision for loan losses of $750,000 for the quarter ended September 30, 2021 compared to a $1.0 million provision for loan losses for the quarter ended September 30, 2020. Net recoveries totaled $100,000 for the quarter ended September 30, 2021, as one significant loan recovery payment was received during the quarter, compared to net recoveries of $85,000 for the quarter ended September 30, 2020.  
    • Noninterest income decreased $1.4 million for the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020, due primarily to a decrease in gains from death benefit received on two bank owned life insurance policies during the three months ended September 30, 2020.
    • Noninterest expense decreased $116,000 for the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020. Other noninterest expense decreased $396,000 as certain loan-related expenses decreased. Compensation, payroll taxes and other employee benefits expense increased $360,000 primarily due to an increase in health insurance expense and Employee Stock Ownership Plan expense as the average stock price increased compared to the quarter ending September 30, 2020.
    • The efficiency ratio was 48.74% for the quarter ended September 30, 2021, compared to 47.23% for the quarter ended September 30, 2020.
    • Average deposits (excluding escrow accounts) totaled $1.25 billion during the quarter ended September 30, 2021, an increase of $74.9 million, or 6.3%, compared to $1.18 billion during the quarter ended September 30, 2020. Average deposits increased $24.3 million, or 7.9% annualized compared to the $1.23 billion for the quarter ended June 30, 2021.
    • Nonperforming assets as percentage of total assets was 0.18% at September 30, 2021, 0.20% at June 30, 2021, and 0.31% at September 30, 2020.
    • Past due loans as percentage of total loans was 0.92% at September 30, 2021, 0.53% at June 30, 2021, and 0.39% at September 30, 2020.
    • PPP loans totaled $4.1 million as of September 30, 2021. The average balance for the quarter ended September 30, 2021 was $10.6 million. For the quarter ended September 30, 2021, PPP loan interest income recognized was approximately $26,000 and the amortization of fee income was approximately $464,000. Net interest margin, excluding the impact of the PPP loans, was 2.63%. Net interest margin for the quarter ended September 30, 2021, including the impact of the PPP loans, was 2.68%.
    • The Company held approximately $3.5 million in loans, representing 0.3% of the total loan portfolio as of September 30, 2021, which had been modified as either a deferment of principal or principal and interest since the beginning of the pandemic. Of the $3.5 million in loans, $559,000 qualify as modifications under the Coronavirus Aid, Relief and Economic Security (“CARES Act”). The remaining $2.9 million is composed of three loan relationships that are classified as troubled debt restructurings.

    Mortgage Banking Segment

    • Pre-tax income totaled $15.6 million for the quarter ended September 30, 2021, compared to $27.4 million for the quarter ended September 30, 2020.
    • Loan originations decreased $241.2 million, or 18.6%, to $1.06 billion during the quarter ended September 30, 2021, compared to $1.30 billion during the quarter ended September 30, 2020. Origination volume relative to purchase activity accounted for 73.8% of originations for the quarter ended September 30, 2021 compared to 64.1% of total originations for the quarter ended September 30, 2020.
    • Mortgage banking non-interest income decreased $21.9 million, or 29.9%, to $51.3 million for the quarter ended September 30, 2021, compared to $73.1 million for the quarter ended September 30, 2020. During the quarter ended September 30, 2021, the Company sold mortgage servicing rights related to $1.24 billion in loans serviced for third parties. The sale generated $12.4 million in net proceeds and a $4.0 million gain. There was no comparable sale during the quarter ended September 30, 2020. As of September 30, 2021, the Company maintained servicing rights related to $160.8 million in loans previously sold to third parties.
    • Gross margin on loans sold decreased to 4.54% for the quarter ended September 30, 2021, compared to 5.44% for the quarter ended September 30, 2020.
    • Total compensation, payroll taxes and other employee benefits decreased $5.6 million, or 16.1%, to $29.0 million during the quarter ended September 30, 2021 compared to $34.6 million during the quarter ended September 30, 2020. 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.
    • Professional fees decreased $4.0 million to $421,000 during the quarter ended September 30, 2021 compared to $4.5 million of expense during the quarter ended September 30, 2020. The decrease related to a decrease in litigation costs compared to the prior year, as the Herrington settlement was resolved during the quarter ended September 30, 2020.
    • Other noninterest expense decreased $174,000 to $2.3 million during the quarter ended September 30, 2021 compared to $2.4 million during the quarter ended September 30, 2020. The decrease related to a decrease in the servicing fees on mortgage servicing rights due to the sale during the quarter ended September 30, 2021.

    Recent Developments:

    COVID-19 Pandemic and the CARES Act

    The CARES Act, signed into law at the end of March 2020, allowed for a temporary delay in the adoption of accounting guidance under Accounting Standards Codification Topic 326, “Financial Instruments – Credit Losses (“CECL”) until the earlier of December 31, 2020 or the 60th day after the end of the COVID-19 national emergency. During the quarter ended June 30, 2020, pursuant to the CARES Act and guidance from the Securities and Exchange Commission (“SEC”) and Financial Accounting Standards Board (“FASB”), we elected to delay adoption of CECL. On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law. Among other provisions, this Act extended the temporary delay on the adoption of CECL until January 1, 2022. We have elected to continue to delay adoption of CECL. As a result, our financial statements for the quarter and year ended September 30, 2021 include an allowance for loan losses that was prepared under the existing incurred loss methodology.

    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.
    WATERSTONE BANK
    11200 W. PLANK CT.
    WAUWATOSA, WI 53226

    Contact: Mark R. Gerke
    Chief Financial Officer
    414-459-4012
    markgerke@wsbonline.com 


    WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES 
    CONSOLIDATED STATEMENTS OF INCOME 
    (Unaudited) 
      
     For The Three Months Ended September 30,For The Nine Months Ended September 30, 
      2021   2020  2021   2020 
     (In Thousands, except per share amounts) 
    Interest income:     
    Loans$16,131  $18,224 $49,214  $54,404 
    Mortgage-related securities 471   588  1,448   1,960 
    Debt securities, federal funds sold and short-term investments 904   732  2,637   2,493 
    Total interest income 17,506   19,544  53,299   58,857 
    Interest expense:     
    Deposits 947   3,495  3,542   11,760 
    Borrowings 2,445   2,640  7,414   7,913 
    Total interest expense 3,392   6,135  10,956   19,673 
    Net interest income 14,114   13,409  42,343   39,184 
    Provision (credit) for loan losses (700)  1,025  (2,520)  6,310 
    Net interest income after provision for loan losses 14,814   12,384  44,863   32,874 
    Noninterest income:     
    Service charges on loans and deposits 1,136   672  2,483   3,384 
    Increase in cash surrender value of life insurance 312   714  1,297   1,587 
    Mortgage banking income 46,547   72,112  150,587   166,292 
    Other 4,941   2,265  6,812   2,868 
    Total noninterest income 52,936   75,763  161,179   174,131 
    Noninterest expenses:     
    Compensation, payroll taxes, and other employee benefits 34,229   39,405  102,278   100,695 
    Occupancy, office furniture, and equipment 2,488   2,469  7,346   7,744 
    Advertising 835   861  2,570   2,625 
    Data processing 986   922  2,871   3,023 
    Communications 331   339  988   994 
    Professional fees 550   4,738  804   7,647 
    Real estate owned 1   11  (11)  55 
    Loan processing expense 1,135   1,336  3,670   3,620 
    Other 2,768   2,920  9,104   9,495 
    Total noninterest expenses 43,323   53,001  129,620   135,898 
    Income before income taxes 24,427   35,146  76,422   71,107 
    Income tax expense 5,427   8,853  18,184   17,797 
    Net income$19,000  $26,293 $58,238  $53,310 
    Income per share:     
    Basic$0.80  $1.08 $2.45  $2.16 
    Diluted$0.79  $1.08 $2.43  $2.15 
    Weighted average shares outstanding:     
    Basic 23,785   24,297  23,790   24,720 
    Diluted 23,960   24,380  23,987   24,842 
          


    WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
     September 30,December 31,
      2021  2020 
     (Unaudited) 
    Assets(In Thousands, except per share amounts)
    Cash$327,288 $56,190 
    Federal funds sold 12,097  18,847 
    Interest-earning deposits in other financial institutions and other short term investments 19,229  19,730 
    Cash and cash equivalents 358,614  94,767 
    Securities available for sale (at fair value) 174,830  159,619 
    Loans held for sale (at fair value) 325,958  402,003 
    Loans receivable 1,226,834  1,375,137 
    Less: Allowance for loan losses 16,790  18,823 
    Loans receivable, net 1,210,044  1,356,314 
       
    Office properties and equipment, net 22,676  23,722 
    Federal Home Loan Bank stock (at cost) 24,438  26,720 
    Cash surrender value of life insurance 65,050  63,573 
    Real estate owned, net 148  322 
    Prepaid expenses and other assets 52,353  57,547 
    Total assets$2,234,111 $2,184,587 
       
    Liabilities and Shareholders' Equity  
    Liabilities:  
    Demand deposits$217,078 $188,225 
    Money market and savings deposits 371,719  295,317 
    Time deposits 657,767  701,328 
    Total deposits 1,246,564  1,184,870 
       
    Borrowings 475,000  508,074 
    Advance payments by borrowers for taxes 25,298  3,522 
    Other liabilities 44,678  75,003 
    Total liabilities 1,791,540  1,771,469 
       
    Shareholders' equity:  
    Preferred stock -  - 
    Common stock 250  251 
    Additional paid-in capital 179,312  180,684 
    Retained earnings 277,316  245,287 
    Unearned ESOP shares (14,540) (15,430)
    Accumulated other comprehensive income, net of taxes 233  2,326 
    Total shareholders' equity 442,571  413,118 
    Total liabilities and shareholders' equity$2,234,111 $2,184,587 
       
    Share Information   
    Shares outstanding 25,038  25,088 
    Book value per share$17.68 $16.47 
    Closing market price$20.49 $18.82 
    Price to book ratio 115.89% 114.27%
       


    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,
      2021   2021   2021   2020   2020 
     (Dollars in Thousands, except per share amounts)
    Condensed Results of Operations:     
    Net interest income$14,114  $14,277  $13,952  $14,316  $13,409 
    Provision (credit) for loan losses (700)  (750)  (1,070)  30   1,025 
    Total noninterest income 52,936   52,044   56,199   69,886   75,763 
    Total noninterest expense 43,323   43,297   43,000   47,163   53,001 
    Income before income taxes 24,427   23,774   28,221   37,009   35,146 
    Income tax expense 5,427   5,880   6,877   9,174   8,853 
    Net income$19,000  $17,894  $21,344  $27,835  $26,293 
    Income per share - basic$0.80  $0.75  $0.90  $1.17  $1.08 
    Income per share - diluted$0.79  $0.74  $0.89  $1.17  $1.08 
    Dividends declared per share$0.20  $0.70  $0.20  $0.50  $0.12 
          
    Performance Ratios (annualized):     
    Return on average assets - QTD 3.38%  3.25%  3.99%  4.96%  4.78%
    Return on average equity - QTD 17.25%  16.49%  20.49%  27.11%  26.30%
    Net interest margin - QTD 2.68%  2.78%  2.80%  2.73%  2.63%
          
    Return on average assets - YTD 3.54%  3.62%  3.99%  3.77%  3.35%
    Return on average equity - YTD 18.08%  18.49%  20.49%  20.18%  18.02%
    Net interest margin - YTD 2.75%  2.79%  2.80%  2.67%  2.64%
          
    Asset Quality Ratios:     
    Past due loans to total loans 0.92%  0.53%  0.52%  0.57%  0.39%
    Nonaccrual loans to total loans 0.32%  0.34%  0.31%  0.40%  0.42%
    Nonperforming assets to total assets 0.18%  0.20%  0.20%  0.27%  0.31%
    Allowance for loan losses to loans receivable 1.37%  1.34%  1.33%  1.37%  1.31%


    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,
      2021  2021  2021  2020  2020 
    Average balances(Dollars in Thousands)
    Interest-earning assets     
    Loans receivable and held for sale$1,573,194 $1,655,078 $1,657,260 $1,775,455 $1,766,715 
    Mortgage related securities 108,743  100,056  90,457  91,199  96,529 
    Debt securities, federal funds sold and short term investments 409,559  308,105  273,929  217,356  166,160 
        Total interest-earning assets 2,091,496  2,063,239  2,021,646  2,084,010  2,029,404 
    Noninterest-earning assets 137,454  143,375  147,781  147,573  160,526 
        Total assets$2,228,950 $2,206,614 $2,169,427 $2,231,583 $2,189,930 
          
    Interest-bearing liabilities     
    Demand accounts$68,478 $63,610 $55,552 $53,771 $50,590 
    Money market, savings, and escrow accounts 391,599  350,270  314,418  304,467  282,349 
    Certificates of deposit 663,343  690,196  705,712  726,132  741,265 
        Total interest-bearing deposits 1,123,420  1,104,076  1,075,682  1,084,370  1,074,204 
    Borrowings 475,000  480,054  482,665  546,070  531,588 
        Total interest-bearing liabilities 1,598,420  1,584,130  1,558,347  1,630,440  1,605,792 
    Noninterest-bearing demand deposits 153,436  141,648  138,446  128,665  129,911 
    Noninterest-bearing liabilities 40,148  45,658  50,188  64,001  56,451 
        Total liabilities 1,792,004  1,771,436  1,746,981  1,823,106  1,792,154 
    Equity 436,946  435,178  422,446  408,477  397,776 
        Total liabilities and equity$2,228,950 $2,206,614 $2,169,427 $2,231,583 $2,189,930 
          
    Average Yield/Costs (annualized)     
    Loans receivable and held for sale 4.07% 3.99% 4.06% 4.08% 4.10%
    Mortgage related securities 1.72% 1.95% 2.20% 2.30% 2.42%
    Debt securities, federal funds sold and short term investments 0.88% 1.12% 1.30% 1.59% 1.75%
        Total interest-earning assets 3.32% 3.47% 3.60% 3.75% 3.83%
          
    Demand accounts 0.08% 0.08% 0.07% 0.07% 0.09%
    Money market and savings accounts 0.24% 0.23% 0.32% 0.53% 0.67%
    Certificates of deposit 0.42% 0.50% 0.72% 1.20% 1.62%
        Total interest-bearing deposits 0.33% 0.39% 0.57% 0.96% 1.29%
    Borrowings 2.04% 2.06% 2.10% 1.97% 1.98%
        Total interest-bearing liabilities 0.84% 0.90% 1.05% 1.30% 1.52%
          


    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,
      2021  2021  2021  2020  2020 
     (Dollars in Thousands)
    Condensed Results of Operations:     
    Net interest income$14,090 $14,517 $14,247 $14,546 $13,461 
    Provision for loan losses (750) (750) (1,100) -  1,000 
    Total noninterest income 1,726  1,630  1,243  1,655  3,104 
    Noninterest expenses:     
    Compensation, payroll taxes, and other employee benefits 5,360  4,874  4,975  5,159  5,000 
    Occupancy, office furniture and equipment 909  887  1,025  934  874 
    Advertising 233  260  209  244  252 
    Data processing 531  466  511  511  490 
    Communications 122  86  119  110  113 
    Professional fees 130  198  194  5  266 
    Real estate owned 1  -  (12) (63) 11 
    Loan processing expense -  -  -  -  - 
    Other 422  461  440  577  818 
    Total noninterest expense 7,708  7,232  7,461  7,477  7,824 
    Income before income taxes 8,858  9,665  9,129  8,724  7,741 
    Income tax expense 2,092  2,128  1,786  1,926  1,565 
    Net income$6,766 $7,537 $7,343 $6,798 $6,176 
          
    Efficiency ratio - QTD 48.74% 44.79% 48.17% 46.15% 47.23%
    Efficiency ratio - YTD 47.21% 46.44% 48.17% 48.71% 49.59%
          

            

    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,
      2021  2021  2021  2020  2020 
     (Dollars in Thousands)
    Condensed Results of Operations:     
    Net interest expense$(2)$(251)$(350)$(223)$(58)
    Provision for loan losses 50  -  30  30  25 
    Total noninterest income 51,290  50,556  55,035  68,500  73,143 
    Noninterest expenses:     
    Compensation, payroll taxes, and other employee benefits 28,981  29,170  29,262  33,347  34,559 
    Occupancy, office furniture and equipment 1,579  1,406  1,540  1,545  1,595 
    Advertising 602  651  615  822  609 
    Data processing 450  443  454  402  426 
    Communications 209  240  212  225  226 
    Professional fees 421  361  (524) 441  4,465 
    Real estate owned -  -  -  -  - 
    Loan processing expense 1,135  1,200  1,335  1,026  1,336 
    Other 2,270  2,678  2,681  2,110  2,444 
    Total noninterest expense 35,647  36,149  35,575  39,918  45,660 
    Income before income taxes 15,591  14,156  19,080  28,329  27,400 
    Income tax expense 3,341  3,761  5,096  7,252  7,284 
    Net income$12,250 $10,395 $13,984 $21,077 $20,116 
          
    Efficiency ratio - QTD 69.50% 71.86% 65.05% 58.46% 62.48%
    Efficiency ratio - YTD 68.71% 68.32% 65.05% 65.20% 67.95%
          
    Loan originations$1,055,500 $1,065,161 $1,115,091 $1,282,321 $1,296,725 
    Purchase 73.8% 75.4% 56.1% 59.2% 64.1%
    Refinance 26.2% 24.6% 43.9% 40.8% 35.9%
    Gross margin on loans sold(1) 4.54% 4.81% 4.86% 5.40% 5.44%
    (1) - Gross margin on loans sold equals mortgage banking income (excluding the change in interest rate lock value) divided by total loan originations
          


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