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Waterstone Financial, Inc. Announces Results of Operations for the Quarter and Year Ended December 31, 2019

Company Release - 1/30/2020 4:45 PM ET

WAUWATOSA, Wis., Jan. 30, 2020 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $8.8 million, or $0.34 per diluted share for the quarter ended December 31, 2019 compared to $5.7 million, or $0.21 per diluted share for the quarter ended December 31, 2018. Net income per diluted share was $1.37 for the year ended December 31, 2019 compared to net income per diluted share of $1.11 for the year ended December 31, 2018.

“We finished a successful fiscal 2019 with a record pre-tax income for a 4th quarter,” said Douglas Gordon, CEO of Waterstone Financial, Inc. “The record $11.8 million in consolidated 4th quarter pre-tax income represents a 62.2% increase over the prior year’s comparable quarter. The results are driven by a record pre-tax 4th quarter from the Community Banking segment and another successful quarter from the Mortgage Banking segment. During the quarter, the Community Banking segment achieved loan and deposit growth, while continuing to invest in technology and additional branch locations for the convenience of our customers. The Mortgage Banking segment continued to benefit from increased production volumes of refinance products, while maintaining a continued focus on cost discipline throughout the organization.” 

Highlights of the Quarter and Year Ended December 31, 2019

Waterstone Financial, Inc. (Consolidated)

  • Consolidated net income of Waterstone Financial, Inc. totaled $8.8 million for the quarter ended December 31, 2019, compared to $5.7 million for the quarter ended December 31, 2018.
  • Consolidated net income of Waterstone Financial, Inc. totaled $35.9 million for the year ended December 31, 2019, compared to $30.8 million for the year ended December 31, 2018.
  • Consolidated return on average assets was 1.75% for the quarter ended December 31, 2019 compared to 1.18% for the quarter ended December 31, 2018.
  • Consolidated return on average assets was 1.82% for the year ended December 31, 2019 compared to 1.64% for the year ended December 31, 2018.
  • Consolidated return on average equity was 8.91% for the quarter ended December 31, 2019 and 5.58% for the quarter ended December 31, 2018.
  • Consolidated return on average equity was 9.14% for the year ended December 31, 2019 and 7.60% for the year ended December 31, 2018.  
  • Dividends declared totaled $0.12 per share during the quarter ended December 31, 2019 amounting to a total of $0.98 in dividends declared per share during the year ended December 31, 2019.
  • The Company returned a total of $48.4 million to shareholders through dividends declared and stock repurchases in 2019. 

Community Banking Segment

  • Pre-tax income totaled $8.3 million for the quarter ended December 31, 2019, which represents a 10.5% increase compared to $7.5 million for the quarter ended December 31, 2018.
  • Net interest income totaled $13.5 million for the quarter ended December 31, 2019, which represents a 2.2% decrease compared to $13.8 million for the quarter ended December 31, 2018.
  • Average loans held for investment totaled $1.38 billion during the quarter ended December 31, 2019, which represents an increase of $15.0 million, or 1.1%, compared to the quarter ended December 31, 2018. Average loans held for investment increased $1.4 million, or 0.4% annualized, compared to $1.38 billion for the quarter ended September 30, 2019.
  • Net interest margin decreased 20 basis points to 2.79% for the quarter ended December 31, 2019 compared to 2.99% for the quarter December 31, 2018, which was a result of the increase in cost of funding as money market accounts, certificates of deposit, and borrowings repriced at higher rates over the past year. Net interest margin decreased one basis point compared to 2.80% for the quarter ended September 30, 2019.
  • The segment had $200,000 negative provision for loan losses for the quarter ended December 31, 2019 compared to no provision for loan losses for loan losses for the quarter ended December 31, 2018. Net recoveries totaled $10,000 for the quarter ended December 31, 2019, compared to net recoveries of $22,000 for the quarter ended December 31, 2018.
  • Noninterest income increased $734,000 for the quarter ended December 31, 2019 compared to the quarter ended December 31, 2018 as loan prepayment penalties on existing loans increased. Additionally, the bank received fees for originating loan swaps which began in the current quarter.
  • Noninterest expenses decreased $161,000 for the quarter ended December 31, 2019 compared to the quarter ended December 31, 2018. Compensation expenses decreased $68,000 as health insurance expense decreased offset by an increase in salaries. Advertising expense increased $132,000 as we increased efforts to attract new customers and data processing expense increased $161,000 as we continue to make investments in technology. Professional fees decreased $177,000 due to less consulting and net real estate owned expenses decreased $189,000 as gains on sales of real estate owned increased. Other noninterest expenses decreased $73,000 as FDIC insurance premiums decreased offset by increased losses on fixed asset disposals.
  • The efficiency ratio was 46.23% for the quarter ended December 31, 2019, compared to 48.69% for the quarter ended December 31, 2018.
  • Average deposits (excluding escrow accounts) totaled $1.06 billion during the quarter ended December 31, 2019, an increase of $36.4 million, or 3.6%, compared to $1.02 billion during the quarter ended December 31, 2018.  Average deposits increased $9.0 million, or 3.4% annualized, compared to the quarter ended September 30, 2019.
  • Nonperforming assets as percentage of total assets was 0.39% at December 31, 2019, 0.41% at September 30, 2019, and 0.45% at December 31, 2018.
  • Past due loans as percentage of total loans was 0.47% at December 31, 2019, 0.62% at September 30, 2019, and 0.50% at December 31, 2018.

Mortgage Banking Segment

  • Pre-tax income totaled $3.4 million for the quarter ended December 31, 2019, compared to $308,000 of pre-tax loss for the quarter ended December 31, 2018.
  • Loan originations increased approximately $176.9 million, or 29.5%, to $777.1 million during the quarter ended December 31, 2019, compared to $600.2 million during the quarter ended December 31, 2018. Origination volume relative to purchase activity accounted for 72.1% of originations for the quarter ended December 31, 2019 compared to 91.1% of total originations for the quarter ended December 31, 2018.
  • Mortgage banking income increased $7.5 million, or 29.8%, to $32.4 million for the quarter ended December 31, 2019, compared to $25.0 million for the quarter ended December 31, 2018.
  • Gross margin on loans sold increased to 4.27% for the quarter ended December 31, 2019, compared to 4.17% for the quarter ended December 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/State St, Brookfield, Fox Point/North Shore, Franklin/Hales Corners, Germantown/Menomonee Falls, Greenfield/Loomis Rd, Oak Creek/27th St, Oak Creek/Howell Ave, Oconomowoc/Lake Country, Pewaukee, Waukesha/Brookfield, West Allis/Greenfield Ave, and West Allis/National Ave, Wisconsin along with a commercial lending office in Minneapolis, Minnesota. 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 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
December 31,
For The Year Ended
December 31,
 
  2019 2018 2019 2018  
  (In Thousands, except per share amounts) 
Interest income:      
Loans$18,547 17,468 72,235 66,966  
Mortgage-related securities 718 723 2,978 2,648  
Debt securities, federal funds sold and short-term investments1,013 1,137 4,528 4,086  
Total interest income 20,278 19,328 79,741 73,700  
Interest expense:      
Deposits 4,465 3,540 17,278 11,627  
Borrowings 2,687 2,322 10,266 7,896  
Total interest expense 7,152 5,862 27,544 19,523  
Net interest income 13,126 13,466 52,197 54,177  
Provision for loan losses (170)- (900)(1,060) 
           
Net interest income after provision for loan losses 13,296 13,466 53,097 55,237  
           
Noninterest income:      
Service charges on loans and deposits 1,091 348 2,363 1,680  
Increase in cash surrender value of life insurance 356 352 1,935 1,848  
Mortgage banking income 32,140 24,221 125,666 113,151  
Other 222 715 786 1,520  
Total noninterest income 33,809 25,636 130,750 118,199  
Noninterest expenses:      
Compensation, payroll taxes, and other employee benefits 26,491 23,114 101,718 97,784  
Occupancy, office furniture, and equipment 2,521 2,860 10,606 10,855  
Advertising 1,051 1,039 3,885 4,123  
Data processing 989 735 3,630 2,792  
Communications 320 382 1,359 1,611  
Professional fees 1,167 397 3,605 2,327  
Real estate owned (221)(62)(146)1  
Loan processing expense 746 643 3,288 3,372  
Other 2,273 2,738 8,328 10,291  
Total noninterest expenses 35,337 31,846 136,273 133,156  
Income before income taxes 11,768 7,256 47,574 40,280  
Income tax expense 2,974 1,578 11,671 9,526  
Net income$8,794 5,678 35,903 30,754  
Income per share:      
Basic$0.34 0.21 1.38 1.12  
Diluted$0.34 0.21 1.37 1.11  
Weighted average shares outstanding:      
Basic 25,586 26,994 26,021 27,363  
Diluted 25,852 27,218 26,247 27,634  
       
       
       


  
WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 
  
 December 31,December 31, 
  2019  2018  
 (Unaudited)  
Assets(In Thousands, except per share amounts) 
Cash$52,814 $48,234  
Federal funds sold 12,704  25,100  
        
Interest-earning deposits in other financial institutions and other short term investments 8,782  12,767  
Cash and cash equivalents 74,300  86,101  
Securities available for sale (at fair value) 178,476  185,720  
Loans held for sale (at fair value) 220,123  141,616  
Loans receivable 1,388,031  1,379,148  
Less: Allowance for loan losses 12,387  13,249  
Loans receivable, net 1,375,644  1,365,899  
    
Office properties and equipment, net 25,028  24,524  
Federal Home Loan Bank stock (at cost) 21,150  19,350  
Cash surrender value of life insurance 69,665  67,550  
Real estate owned, net 748  2,152  
Prepaid expenses and other assets 31,213  22,469  
Total assets$1,996,347 $1,915,381  
    
Liabilities and Shareholders' Equity   
Liabilities:   
Demand deposits$130,063 $139,111  
Money market and savings deposits 197,942  163,511  
Time deposits 739,771  735,873  
Total deposits 1,067,776  1,038,495  
    
Borrowings 483,562  435,046  
Advance payments by borrowers for taxes 4,212  4,371  
Other liabilities 47,111  37,790  
Total liabilities 1,602,661  1,515,702  
    
Shareholders' equity:   
Preferred stock -  -  
Common stock 271  285  
Additional paid-in capital 211,997  232,406  
Retained earnings 197,393  187,153  
Unearned ESOP shares (16,617) (17,804) 
Accumulated other comprehensive income (loss), net of taxes 642  (2,361) 
Total shareholders' equity 393,686  399,679  
Total liabilities and shareholders' equity$1,996,347 $1,915,381  
    
Share Information    
Shares outstanding 27,148  28,463  
Book value per share$14.50 $14.04  
Closing market price$19.03 $16.76  
Price to book ratio 131.24% 119.37% 
    


  
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, 
  2019 2019201920192018 
 (Dollars in Thousands, except per share amounts) 
Condensed Results of Operations:      
Net interest income$13,126 13,154 12,981 12,936 13,466  
Provision for loan losses (170)(80)30 (680)-  
Total noninterest income 33,809 37,494 35,190 24,257 25,636  
Total noninterest expense 35,337 36,232 35,355 29,349 31,846  
Income before income taxes 11,768 14,496 12,786 8,524 7,256  
Income tax expense 2,974 3,572 3,143 1,982 1,578  
Net income$8,794 10,924 9,643 6,542 5,678  
Income per share – basic$0.34 0.42 0.37 0.25 0.21  
Income per share – diluted$0.34 0.42 0.37 0.24 0.21  
Dividends declared per share$0.12 0.12 0.12 0.62 0.12  
       
Performance Ratios (annualized):      
Return on average assets - QTD 1.75%2.17%1.95%1.39%1.18% 
Return on average equity - QTD 8.91%11.15%9.96%6.65%5.58% 
Net interest margin - QTD 2.79%2.80%2.82%2.93%2.99% 
       
Return on average assets - YTD 1.82%1.84%1.67%1.39%1.64% 
Return on average equity - YTD 9.14%9.21%8.28%6.65%7.60% 
Net interest margin - YTD 2.83%2.85%2.88%2.93%3.09% 
       
Asset Quality Ratios:      
Past due loans to total loans 0.47%0.62%0.61%0.46%0.50% 
Nonaccrual loans to total loans 0.51%0.46%0.41%0.49%0.48% 
Nonperforming assets to total assets 0.39%0.41%0.37%0.44%0.45% 
       


 
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,
 20192019201920192018
Average balances(Dollars in Thousands)
Interest-earning assets     
Loans receivable and held for sale1,573,190 1,579,575 1,552,199 1,477,991 1,496,125 
Mortgage related securities110,426 114,051 114,537 115,674 111,004 
Debt securities, federal funds sold and short term investments183,447 169,621 180,111 194,669 179,232 
  Total interest-earning assets1,867,063 1,863,247 1,846,847 1,788,334 1,786,361 
Noninterest-earning assets125,904 137,723 136,263 125,396 119,715 
  Total assets1,992,967 2,000,970 1,983,110 1,913,730 1,906,076 
      
Interest-bearing liabilities     
Demand accounts38,650 37,015 35,744 36,268 36,941 
Money market, savings, and escrow accounts215,332 206,474 193,542 176,237 184,873 
Certificates of deposit737,726 739,544 736,798 735,471 722,774 
  Total interest-bearing deposits991,708 983,033 966,084 947,976 944,588 
Borrowings485,482 509,099 504,940 438,905 439,601 
  Total interest-bearing liabilities1,477,190 1,492,132 1,471,024 1,386,881 1,384,189 
           
Noninterest-bearing demand deposits85,815 86,849 91,545 97,951 97,677 
Noninterest-bearing liabilities38,580 33,130 32,143 30,027 20,219 
  Total liabilities1,601,585 1,612,111 1,594,712 1,514,859 1,502,085 
Equity391,382 388,859 388,398 398,871 403,991 
  Total liabilities and equity1,992,967 2,000,970 1,983,110 1,913,730 1,906,076 
      
Average Yield/Costs (annualized)     
Loans receivable and held for sale4.68%4.66%4.66%4.69%4.63%
Mortgage related securities2.58%2.56%2.68%2.66%2.58%
Debt securities, federal funds sold and short term investments2.19%2.53%2.50%2.73%2.52%
  Total interest-earning assets4.31%4.34%4.32%4.35%4.29%
      
Demand accounts0.10%0.09%0.09%0.09%0.09%
Money market and savings accounts0.66%0.57%0.66%0.63%0.47%
Certificates of deposit2.20%2.24%2.19%2.04%1.82%
  Total interest-bearing deposits1.79%1.81%1.80%1.71%1.49%
Borrowings2.20%2.14%2.06%2.08%2.10%
  Total interest-bearing liabilities1.92%1.92%1.89%1.82%1.68%
      


 
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,
  20192019201920192018
  (Dollars in Thousands)
Condensed Results of Operations:      
Net interest income$13,472 13,885 13,530 13,132 13,774 
Provision for loan losses (200)(150)- (700)- 
Total noninterest income 1,645 1,415 1,079 881 911 
Noninterest expenses:      
Compensation, payroll taxes, and other employee benefits 4,693 4,075 4,671 4,756 4,761 
Occupancy, office furniture and equipment 894 942 944 972 842 
Advertising 317 202 220 181 185 
Data processing 583 588 493 457 422 
Communications 93 90 93 82 92 
Professional fees 162 223 160 268 339 
Real estate owned (251)24 19 32 (62)
Loan processing expense - - - - - 
Other 498 583 635 489 571 
Total noninterest expense 6,989 6,727 7,235 7,237 7,150 
Income before income taxes 8,328 8,723 7,374 7,476 7,535 
Income tax expense 2,033 1,982 1,594 1,687 1,632 
Net income$6,295 6,741 5,780 5,789 5,903 
       
Efficiency ratio - QTD 46.23%43.97%49.52%51.64%48.69%
Efficiency ratio - YTD 47.74%48.27%50.56%51.64%47.63%


 
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,
  2019 2019 2019 2019 2018 
 (Dollars in Thousands)
Condensed Results of Operations:     
Net interest income$(399)(774)(529)(208)(332)
Provision for loan losses 30 70 30 20 - 
Total noninterest income 32,440 36,535 34,364 23,571 24,986 
Noninterest expenses:     
Compensation, payroll taxes, and other employee benefits 21,975 23,616 22,579 16,060 18,499 
Occupancy, office furniture and equipment 1,627 1,687 1,736 1,804 2,018 
Advertising 734 711 743 777 854 
Data processing 402 411 372 308 309 
Communications 227 268 260 246 290 
Professional fees 1,000 688 620 426 52 
Real estate owned 30 - - - - 
Loan processing expense 746 858 879 805 643 
Other 1,918 1,725 1,186 1,912 2,297 
Total noninterest expense 28,659 29,964 28,375 22,338 24,962 
Income (loss) before income taxes 3,352 5,727 5,430 1,005 (308)
Income tax expense (benefit) 921 1,584 1,545 286 (62)
Net income (loss)$2,431 4,143 3,885 719 (246)
      
Efficiency ratio - QTD 89.44%83.79%83.86%95.61%101.25%
Efficiency ratio - YTD 87.47%86.79%88.66%95.61%92.89%
      
Loan originations$777,073 851,297 793,254 501,432 600,156 
Purchase 72.1%79.0%87.6%89.9%91.1%
Refinance 27.9%21.0%12.4%10.1%8.9%
Gross margin on loans sold(1) 4.27%4.30%4.29%4.57%4.17%
(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
[email protected]

Source: Waterstone Financial, Inc.