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Waterstone Financial, Inc. Announces Results of Operations for the Quarter and Six Months Ended June 30, 2018

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WAUWATOSA, Wis., July 31, 2018 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ:WSBF), holding company for WaterStone Bank, reported net income of $9.4 million, or $0.34 per diluted share for the quarter ended June 30, 2018 compared to $8.9 million, or $0.32 per diluted share for the quarter ended June 30, 2017. Net income per diluted share was $0.59 for the six months ended June 30, 2018 compared to net income per diluted share of $0.55 for the six months ended June 30, 2017.  

"We are pleased to report a record second quarter net income of $9.4 million and earnings per share of $0.34," said Douglas Gordon, CEO of Waterstone Financial, Inc. "The Community Banking segment continued its momentum by achieving a year over year 24.2% increase in pre-tax earnings.  Our success stemmed from continued strong loan growth, margin expansion and expense management.  The Mortgage Banking segment continued to be negatively impacted by margin compression during the second quarter of 2018, as market competition remains strong within the industry due to lower refinancing activity and diminished levels of housing inventory.  While the current mortgage banking environment presents challenges, we believe that it will also present opportunities to acquire talent, such as the addition of our New Mexico branch during the second quarter."     

Highlights of the Quarter Ended June 30, 2018

Waterstone Financial, Inc. (Consolidated)

  • Consolidated net income of Waterstone Financial, Inc. totaled $9.4 million for the quarter ended June 30, 2018, compared to $8.9 million for the quarter ended June 30, 2017.
  • Consolidated return on average assets totaled 2.02% for the quarter ended June 30, 2018 compared to 1.99% for the quarter ended June 30, 2017.
  • Consolidated return on average equity increased 70 bps to 9.40% for the quarter ended June 30, 2018 compared to 8.70% for the quarter ended June 30, 2017.
  • The effective income tax rate amounted to 24.8% for the quarter ended June 30, 2018 compared to 34.3% for the quarter ended June 30, 2017 primarily as a result of the Tax Cuts and Jobs Act reducing the federal rate from 35% to 21%.
  • Dividends declared totaled $0.12 per share during the quarter ended June 30, 2018 amounting to a total of $0.74 in dividends declared per share during the six months ended June 30, 2018.

Community Banking Segment

  • Pre-tax income of the segment totaled $8.5 million for the quarter ended June 30, 2018, which represents a 24.2% increase compared to $6.9 million for the quarter ended June 30, 2017.
  • Net interest income of the segment totaled $13.7 million for the quarter ended June 30, 2018, which represents a 10.6% increase compared to $12.4 million for the quarter ended June 30, 2017. Our net interest margin increased 14 bps to 3.14% for the quarter ended June 30, 2018 compared to 3.00% for the quarter ended June 30, 2017, which was driven by loan growth along with a decrease in borrowing costs.
  • Continued improvement in the overall risk profile of our loan portfolio resulted in a negative provision for loan losses of $250,000 for the quarter ended June 30, 2018 compared to no provision for the quarter ended June 30, 2017. The negative provision reflects recoveries received along with continued sustained improvements in loan quality metrics including: non–accrual loans, loans classified as substandard or watch and loans past due.
  • Average loans held for investment totaled $1.33 billion during the quarter ended June 30, 2018, which represents an increase of $124.0 million, or 10.3% over the comparable quarter in the prior year. 
  • Average deposits totaled $991.4 million during the quarter ended June 30, 2018, which represents an increase of $46.4 million, or 5.1%, over the comparable quarter in the prior year. 
  • Driven by net interest margin expansion and continued cost control efforts, the efficiency ratio for the community banking segment improved to 44.3% for the quarter ended June 30, 2018, compared to 48.8% for the quarter ended June 30, 2017.
  • Nonperforming assets as percentage of total assets decreased to 0.47% as of June 30, 2018, compared to 0.54% at March 31, 2018 and 0.71% at June 30, 2017.

Mortgage Banking Segment

  • Pre-tax income of the segment totaled $4.0 million for the quarter ended June 30, 2018, which represents a 40.2% decrease compared to $6.7 million for the quarter ended June 30, 2017.
  • Loan originations decreased $45.6 million, or 5.9%, to $721.2 million during the quarter ended June 30, 2018, compared to $766.8 million during the quarter ended June 30, 2017.  Origination volume relative to purchase activity accounted for 92.6% of originations for the quarter ended June 30, 2018 compared to 91.7% of total originations for the quarter ended June 30, 2017.
  • Gross margins on loans sold decreased approximately 10% during the quarter ended June 30, 2018, compared to the quarter ended June 30, 2017. 

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, 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 has the ability to lend in 47 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 June 30,
For The Six Months
Ended June 30,
    2018 2017 2018 2017
    (In Thousands, except per share amounts)
Interest income:          
Loans $ 16,700   14,985   32,158   29,223  
Mortgage-related securities   644   678   1,282   1,374  
Debt securities, federal funds sold and short-term investments   1,019   877   1,886   1,729  
Total interest income   18,363   16,540   35,326   32,326  
Interest expense:          
Deposits   2,710   1,838   5,024   3,633  
Borrowings   1,933   2,221   3,441   4,317  
Total interest expense   4,643   4,059   8,465   7,950  
Net interest income   13,720   12,481   26,861   24,376  
Provision for loan losses   (220 ) 25   (1,100 ) (1,186 )
Net interest income after provision for loan losses   13,940   12,456   27,961   25,562  
Noninterest income:          
Service charges on loans and deposits   491   481   890   848  
Increase in cash surrender value of life insurance   473   470   801   788  
Loss on sale of available for sale securities   -   (107 ) -   (107 )
Mortgage banking income   32,090   36,224   56,277   60,911  
Other   264   173   533   738  
Total noninterest income   33,318   37,241   58,501   63,178  
Noninterest expenses:          
Compensation, payroll taxes, and other employee benefits   26,234   27,584   47,217   47,579  
Occupancy, office furniture, and equipment   2,605   2,527   5,244   5,054  
Advertising   1,000   869   1,860   1,593  
Data processing   623   633   1,248   1,231  
Communications   435   397   817   776  
Professional fees   647   717   1,347   1,324  
Real estate owned   (126 ) (133 ) 191   278  
FDIC insurance premiums   105   117   230   237  
Other   3,214   3,476   6,730   7,173  
Total noninterest expenses   34,737   36,187   64,884   65,245  
Income before income taxes   12,521   13,510   21,578   23,495  
Income tax expense   3,101   4,622   5,205   8,035  
Net income $ 9,420   8,888   16,373   15,460  
Income per share:          
Basic $ 0.34   0.32   0.60   0.56  
Diluted $ 0.34   0.32   0.59   0.55  
Weighted average shares outstanding:          
Basic   27,504   27,487   27,506   27,406  
Diluted   27,742   27,955   27,790   27,913  
           
           

 

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 
   June 30,   December 31, 
   2018   2017 
  (Unaudited)  
Assets (In Thousands, except per share amounts)
Cash $   61,995   $   22,306  
Federal funds sold     9,332       17,034  
Interest-earning deposits in other financial institutions and other short term investments     6,789       9,267  
Cash and cash equivalents     78,116       48,607  
Securities available for sale (at fair value)     185,018       199,707  
Loans held for sale (at fair value)     142,954       149,896  
Loans receivable     1,342,136       1,291,814  
Less: Allowance for loan losses     13,124       14,077  
Loans receivable, net     1,329,012       1,277,737  
     
Office properties and equipment, net     22,770       22,941  
Federal Home Loan Bank stock (at cost)     19,350       16,875  
Cash surrender value of life insurance     66,977       65,996  
Real estate owned, net     2,378       4,558  
Prepaid expenses and other assets     30,655       20,084  
Total assets $   1,877,230   $   1,806,401  
     
Liabilities and Shareholders' Equity    
Liabilities:    
Demand deposits $   135,370   $   129,597  
Money market and savings deposits     153,484       148,804  
Time deposits     706,586       688,979  
Total deposits     995,440       967,380  
     
Borrowings     432,523       386,285  
Advance payments by borrowers for taxes     22,721       4,876  
Other liabilities     22,802       35,756  
Total liabilities     1,473,486       1,394,297  
     
Shareholders' equity:    
Common stock     293       295  
Additional paid-in capital     328,450       326,655  
Retained earnings     179,267       183,358  
Unearned ESOP shares     (18,397 )     (18,991 )
Accumulated other comprehensive loss, net of taxes     (3,168 )     (477 )
Cost of shares repurchased     (82,701 )     (78,736 )
Total shareholders' equity     403,744       412,104  
Total liabilities and shareholders' equity $   1,877,230   $   1,806,401  
     
Share Information     
Shares Outstanding     29,318       29,501  
Book Value per share $   13.77   $   13.97  
Closing market price $   17.05   $   17.05  
Price to book ratio   123.82 %   122.05 %
             
             


 

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,
  2018
2018
2017
2017
2017
  (Dollars in Thousands)
Condensed Results of Operations:          
Net interest income $ 13,720   13,141   13,324   13,033   12,481  
Provision for loan losses   (220 ) (880 ) -   20   25  
Total noninterest income   33,318   25,183   28,181   33,054   37,241  
Total noninterest expense   34,737   30,147   32,318   34,316   36,187  
Income before income taxes   12,521   9,057   9,187   11,751   13,510  
Income tax expense   3,101   2,104   6,072   4,362   4,622  
Net income $ 9,420   6,953   3,115   7,389   8,888  
Income per share – basic $ 0.34   0.25   0.11   0.27   0.32  
Income per share – diluted $ 0.34   0.25   0.11   0.26   0.32  
Dividends declared per share $ 0.12   0.62   0.12   0.12   0.62  
           
Performance Ratios:          
Return on average assets - QTD   2.02 % 1.57 % 0.67 % 1.56 % 1.99 %
Return on average equity - QTD   9.40 % 6.90 % 2.98 % 7.12 % 8.70 %
Net interest margin - QTD   3.14 % 3.18 % 3.08 % 2.95 % 3.00 %
           
Return on average assets - YTD   1.80 % 1.57 % 1.43 % 1.70 % 1.77 %
Return on average equity - YTD   8.13 % 6.90 % 6.32 % 7.42 % 7.56 %
Net interest margin - YTD   3.16 % 3.18 % 3.00 % 2.97 % 2.98 %
           
Asset Quality Ratios:          
Past due loans to total loans   0.54 % 0.53 % 0.45 % 0.71 % 0.74 %
Non accrual loans to total loans   0.46 % 0.50 % 0.47 % 0.56 % 0.70 %
Non performing assets to total assets   0.45 % 0.54 % 0.59 % 0.62 % 0.71 %
           
           

 

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,
  2018 2018 2017 2017 2017
  (Dollars in Thousands)
Condensed Results of Operations:          
Net interest income $ 13,747   13,304   13,375   13,120   12,433  
Provision for loan losses   (250 ) (900 ) -   -   -  
Total noninterest income   1,137   939   974   1,161   995  
Total noninterest expense   6,588   7,682   6,939   6,824   6,547  
Income before income taxes   8,546   7,461   7,410   7,457   6,881  
Income tax expense   1,970   1,668   5,570   2,597   1,902  
Net income $ 6,576   5,793   1,840   4,860   4,979  
           
Efficiency ratio - QTD   44.27 % 53.94 % 48.36 % 47.78 % 48.76 %
Efficiency ratio - YTD   49.00 % 53.94 % 49.98 % 50.56 % 52.09 %
                       
                       

 

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,
  2018 2018 2017 2017 2017
  (Dollars in Thousands)
Condensed Results of Operations:          
Net interest income $ (40 ) (192 ) (72 ) (102 ) (1 )
Provision for loan losses   30   20   -   20   -  
Total noninterest income   32,547   24,731   27,645   32,318   36,743  
Total noninterest expense   28,493   22,941   25,791   27,882   30,080  
Income before income taxes   3,984   1,578   1,782   4,314   6,662  
Income tax expense   1,133   435   509   1,767   2,715  
Net income $ 2,851   1,143   1,273   2,547   3,947  
           
Efficiency ratio - QTD   87.65 % 93.49 % 93.54 % 86.55 % 81.87 %
Efficiency ratio - YTD   90.16 % 93.49 % 86.93 % 85.00 % 84.20 %
           
Loan Originations   721,184   516,020   600,265   684,500   766,759  
                       

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

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