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Waterstone Financial, Inc. Announces Results of Operations for the Quarter Ended March 31, 2018

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WAUWATOSA, Wis., April 24, 2018 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ:WSBF), holding company for WaterStone Bank, reported net income of $7.0 million, or $0.25 per diluted share for the quarter ended March 31, 2018 compared to $6.6 million, or $0.24 per diluted share for the quarter ended March 31, 2017.    

"We accomplished a record first quarter net income led by a 23.9% increase in earnings of our Community Banking segment," said Douglas Gordon, CEO of Waterstone Financial, Inc. "The positive impact of continued strong loan growth and an increase in net interest margin were compounded by a reduction of the federal income tax rate, which lead to our first quarter success.  The Mortgage Banking segment faced continued margin compression into the first quarter of 2018, as competition remains strong within the industry to maintain market share.  As a result of our strong earnings and ample capital, we were able to declare dividends totaling $0.62 per share to our shareholders during the first quarter and provide liquidity to shareholders through stock repurchase activity."     

Highlights of the Quarter Ended March 31, 2018

Waterstone Financial, Inc. (Consolidated)

  • Consolidated net income of Waterstone Financial, Inc. totaled $7.0 million for the quarter ended March 31, 2018, compared to $6.6 million for the quarter ended March 31, 2017.
  • Consolidated return on average assets totaled 1.57% for the quarter ended March 31, 2018 compared to 1.54% for the quarter ended March 31, 2017.
  • The effective income tax rate amounted to 23.2% for the quarter ended March 31, 2018 compared to 34.2% for the quarter ended March 31, 2017 primarily as a result of the Tax Cuts and Jobs Act reducing the federal rate from 35% to 21%.
  • Dividends declared totaled $0.62 per share during the quarter ended March 31, 2018.
  • Repurchased a total 192,800 shares on the open market during the quarter ended March 31, 2018 at an average price of $17.13 per share. 

Community Banking Segment

  • Pre-tax income of the segment totaled $7.5 million for the quarter ended March 31, 2018, which represents a 9.2% increase compared to $6.8 million for the quarter ended March 31, 2017.
  • Continued improvement in the overall risk profile of our loan portfolio resulted in a negative provision for loan losses of $900,000 for the quarter ended March 31, 2018 compared to a negative provision of $1.3 million for the quarter ended March 31, 2017.  
  • Net interest income of the segment totaled $13.3 million for the quarter ended March 31, 2018, which represents a 13.9% increase compared to $11.7 million for the quarter ended March 31, 2017. The increase in net interest income, which was driven by loan growth along with a decrease in borrowing costs, drove our net interest margin to 3.18% for the quarter ended March 31, 2018 compared to 2.97% for the quarter ended March 31, 2017.   
  • Average loans held for investment totaled $1.30 billion during the quarter ended March 31, 2018, which represents an increase of $110.8 million, or 9.3% over the comparable quarter in the prior year. 
  • Total loans held for investment increased $22.9 million, or 1.8%, to $1.31 billion at March 31, 2018 compared to $1.29 billion at December 31, 2017. 
  • Total deposits increased $6.8 million, or 0.7%, to $974.2 million at March 31, 2018 compared to $967.4 million at December 31, 2017. 
  • Driven by margin expansion and continued cost control efforts, the efficiency ratio for the community banking segment improved to 53.9% for the quarter ended March 31, 2018, compared to 55.7% for the quarter ended March 31, 2017.
  • Nonperforming assets as percentage of total assets decreased to 0.54% as of March 31, 2018, compared to 0.59% at December 31, 2017 and 0.76% at March 31, 2017.

Mortgage Banking Segment

  • Pre-tax income of the segment totaled $1.6 million for the quarter ended March 31, 2018, which represents a 48.4% decrease compared to $3.1 million for the quarter ended March 31, 2017.
  • Loan originations increased $21.2 million, or 4.3%, to $516.0 million during the quarter ended March 31, 2018, compared to $494.9 million during the quarter ended March 31, 2017.  Origination volume relative to purchase activity accounted for 85% of originations for the quarter ended March 31, 2018 compared to 86% of total originations for the quarter ended March 31, 2017.
  • Gross margins on loans sold decreased approximately 6% during the quarter ended March 31, 2018, compared to the quarter ended March 31, 2017. 

About Waterstone Financial, Inc.

Waterstone Financial, Inc. (NASDAQ:WSBF) 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 offers mortgage banking offices in 23 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,
    2018
2017
    (In Thousands, except per share amounts)
Interest income:      
Loans $ 15,458   14,238  
Mortgage-related securities   638   696  
Debt securities, federal funds sold and short-term investments   867   852  
Total interest income   16,963   15,786  
Interest expense:      
Deposits   2,314   1,795  
Borrowings   1,508   2,096  
Total interest expense   3,822   3,891  
Net interest income   13,141   11,895  
Provision for loan losses   (880 ) (1,211 )
Net interest income after provision for loan losses   14,021   13,106  
Noninterest income:      
Service charges on loans and deposits   399   367  
Increase in cash surrender value of life insurance   328   318  
Mortgage banking income   24,187   24,687  
Other   269   565  
Total noninterest income   25,183   25,937  
Noninterest expenses:      
Compensation, payroll taxes, and other employee benefits   20,983   19,995  
Occupancy, office furniture, and equipment   2,639   2,527  
Advertising   860   724  
Data processing   625   598  
Communications   382   379  
Professional fees   700   607  
Real estate owned   317   411  
FDIC insurance premiums   125   120  
Other   3,516   3,697  
Total noninterest expenses   30,147   29,058  
Income before income taxes   9,057   9,985  
Income tax expense   2,104   3,413  
Net income $ 6,953   6,572  
Income per share:      
Basic $ 0.25   0.24  
Diluted $ 0.25   0.24  
Weighted average shares outstanding:      
Basic   27,509   27,323  
Diluted   27,802   27,867  



WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
   March 31,  December 31,
  2018
2017
  (Unaudited)  
Assets (In Thousands, except per share amounts)
Cash $ 53,000   $ 22,306  
Federal funds sold   27,143     17,034  
Interest-earning deposits in other financial institutions and other short term investments   3,264     9,267  
Cash and cash equivalents   83,407     48,607  
Securities available for sale (at fair value)   186,983     199,707  
Loans held for sale (at fair value)   127,638     149,896  
Loans receivable   1,314,672     1,291,814  
Less: Allowance for loan losses   13,190     14,077  
Loans receivable, net   1,301,482     1,277,737  
     
Office properties and equipment, net   22,592     22,941  
Federal Home Loan Bank stock (at cost)   18,675     16,875  
Cash surrender value of life insurance   66,324     65,996  
Real estate owned, net   3,374     4,558  
Prepaid expenses and other assets   28,789     20,084  
Total assets $ 1,839,264   $ 1,806,401  
     
Liabilities and Shareholders' Equity    
Liabilities:    
Demand deposits $ 131,520   $ 129,597  
Money market and savings deposits   145,506     148,804  
Time deposits   697,198     688,979  
Total deposits   974,224     967,380  
     
Borrowings   434,365     386,285  
Advance payments by borrowers for taxes   12,004     4,876  
Other liabilities   21,252     35,756  
Total liabilities   1,441,845     1,394,297  
     
Shareholders' equity:    
Common stock   293     295  
Additional paid-in capital   327,748     326,655  
Retained earnings   173,163     183,358  
Unearned ESOP shares   (18,694 )   (18,991 )
Accumulated other comprehensive loss, net of taxes   (2,631 )   (477 )
Cost of shares repurchased   (82,460 )   (78,736 )
Total shareholders' equity   397,419     412,104  
Total liabilities and shareholders' equity $ 1,839,264   $ 1,806,401  
     
Share Information    
Shares Outstanding   29,324     29,501  
Book Value per share $ 13.55   $ 13.97  
Closing market price $ 17.30   $ 17.05  
Price to book ratio   127.68 %   122.05 %



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,
  2018
2017
2017
2017
2017
  (Dollars in Thousands)
Condensed Results of Operations:          
Net interest income $ 13,141   13,324   13,033   12,481   11,895  
Provision for loan losses   (880 ) -   20   25   (1,211 )
Total noninterest income   25,183   28,181   33,054   37,241   25,937  
Total noninterest expense   30,147   32,318   34,316   36,187   29,058  
Income before income taxes   9,057   9,187   11,751   13,510   9,985  
Income tax expense   2,104   6,072   4,362   4,622   3,413  
Net income $ 6,953   3,115   7,389   8,888   6,572  
Income per share – basic $ 0.25   0.11   0.27   0.32   0.24  
Income per share – diluted $ 0.25   0.11   0.26   0.32   0.24  
Dividends declared per share $ 0.62   0.12   0.12   0.62   0.12  
           
Performance Ratios:          
Return on average assets - QTD   1.57 % 0.67 % 1.56 % 1.99 % 1.54 %
Return on average equity - QTD   6.90 % 2.98 % 7.12 % 8.70 % 6.44 %
Net interest margin - QTD   3.18 % 3.08 % 2.95 % 3.00 % 2.97 %
Community Banking Segment          
Efficiency ratio - QTD   53.94 % 48.36 % 47.78 % 48.76 % 55.69 %
           
Return on average assets - YTD   1.57 % 1.43 % 1.70 % 1.77 % 1.54 %
Return on average equity - YTD   6.90 % 6.32 % 7.42 % 7.56 % 6.44 %
Net interest margin - YTD   3.18 % 3.00 % 2.97 % 2.98 % 2.97 %
Community Banking Segment          
Efficiency ratio - YTD   53.94 % 49.98 % 50.56 % 52.09 % 55.69 %
           
Asset Quality Ratios:          
Past due loans to total loans   0.53 % 0.45 % 0.71 % 0.74 % 0.71 %
Non accrual loans to total loans   0.50 % 0.47 % 0.56 % 0.70 % 0.67 %
Non performing assets to total assets   0.54 % 0.59 % 0.62 % 0.71 % 0.76 %


Contact: Mark R. Gerke
Chief Financial Officer
414.459.4012
markgerke@wsbonline.com

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