WAUWATOSA, Wis., Oct. 26, 2022 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $5.3 million, or $0.25 per diluted share for the quarter ended September 30, 2022 compared to $19.0 million, or $0.79 per diluted share for the quarter ended September 30, 2021. Net income per diluted share was $0.83 for the nine months ended September 30, 2022 compared to net income per diluted share of $2.43 for the nine months ended September 30, 2021.

"We were pleased with the execution of the community banking segment as loan growth remained strong through the quarter,” said Douglas Gordon, Chief Executive Officer of Waterstone Financial, Inc. “We were able to grow our net interest income and expand margin at the community banking segment as we deployed our cash to fund loans. The results of the mortgage banking segment were disappointing and reflect the significant headwinds that the industry continues to face due to an increase in rates and resulting decline in demand. We continue to execute on cost containment measures, while we also seek opportunities to add production talent.”

Highlights of the Quarter Ended September 30, 2022

Waterstone Financial, Inc. (Consolidated)

Community Banking Segment

Mortgage Banking Segment

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 September 30,  For The Nine Months Ended September 30, 
  2022  2021  2022  2021 
  (In Thousands, except per share amounts) 
Interest income:                
Loans $16,235  $16,131  $44,281  $49,214 
Mortgage-related securities  903   471   2,326   1,448 
Debt securities, federal funds sold and short-term investments  987   904   2,964   2,637 
Total interest income  18,125   17,506   49,571   53,299 
Interest expense:                
Deposits  981   947   2,511   3,542 
Borrowings  1,746   2,445   5,717   7,414 
Total interest expense  2,727   3,392   8,228   10,956 
Net interest income  15,398   14,114   41,343   42,343 
Provision (credit) for credit losses (1)  332   (700)  304   (2,520)
Net interest income after provision for loan losses  15,066   14,814   41,039   44,863 
Noninterest income:                
Service charges on loans and deposits  529   1,136   1,705   2,483 
Increase in cash surrender value of life insurance  354   312   1,394   1,297 
Mortgage banking income  26,064   46,547   83,749   150,587 
Other  457   4,941   1,612   6,812 
Total noninterest income  27,404   52,936   88,460   161,179 
Noninterest expenses:                
Compensation, payroll taxes, and other employee benefits  26,174   34,229   77,502   102,278 
Occupancy, office furniture, and equipment  2,296   2,488   6,540   7,346 
Advertising  1,137   835   3,004   2,570 
Data processing  1,084   986   3,430   2,871 
Communications  302   331   900   988 
Professional fees  393   550   1,203   804 
Real estate owned  1   1   6   (11)
Loan processing expense  1,120   1,135   3,685   3,670 
Other  3,187   2,768   9,408   9,104 
Total noninterest expenses  35,694   43,323   105,678   129,620 
Income before income taxes  6,776   24,427   23,821   76,422 
Income tax expense  1,506   5,427   5,269   18,184 
Net income $5,270  $19,000  $18,552  $58,238 
Income per share:                
Basic $0.25  $0.80  $0.84  $2.45 
Diluted $0.25  $0.79  $0.83  $2.43 
Weighted average shares outstanding:                
Basic  21,342   23,785   22,193   23,790 
Diluted  21,454   23,960   22,323   23,987 

(1) The Company adopted ASU 2016-13 as of January 1, 2022.  The 2021 amount presented is calculated under the prior accounting standard. 

 
WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

  September 30,  December 31, 
  2022  2021 
  (Unaudited)     
Assets (In Thousands, except per share amounts) 
Cash $37,231  $343,016 
Federal funds sold  16,007   13,981 
Interest-earning deposits in other financial institutions and other short term investments  19,703   19,725 
Cash and cash equivalents  72,941   376,722 
Securities available for sale (at fair value)  197,298   179,016 
Loans held for sale (at fair value)  186,049   312,738 
Loans receivable  1,354,465   1,205,785 
Less: Allowance for credit losses ("ACL") - loans (1)  17,452   15,778 
Loans receivable, net  1,337,013   1,190,007 
         
Office properties and equipment, net  21,491   22,273 
Federal Home Loan Bank stock (at cost)  15,750   24,438 
Cash surrender value of life insurance  66,099   65,368 
Real estate owned, net  148   148 
Prepaid expenses and other assets  78,262   45,148 
Total assets $1,975,051  $2,215,858 
         
Liabilities and Shareholders' Equity        
Liabilities:        
Demand deposits $246,487  $214,409 
Money market and savings deposits  346,960   392,314 
Time deposits  593,681   626,663 
Total deposits  1,187,128   1,233,386 
         
Borrowings  319,951   477,127 
Advance payments by borrowers for taxes  24,084   4,094 
Other liabilities  67,714   68,478 
Total liabilities  1,598,877   1,783,085 
         
Shareholders' equity:        
Preferred stock  -   - 
Common stock  223   248 
Additional paid-in capital  130,731   174,505 
Retained earnings  277,514   273,398 
Unearned ESOP shares  (13,353)  (14,243)
Accumulated other comprehensive loss, net of taxes  (18,941)  (1,135)
Total shareholders' equity  376,174   432,773 
Total liabilities and shareholders' equity $1,975,051  $2,215,858 
         
Share Information        
Shares outstanding  22,318   24,795 
Book value per share $16.86  $17.45 
         

 (1) The Company adopted ASU 2016-13 as of January 1, 2022.  The 2021 amount presented is calculated under the prior accounting standard.  


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, 
  2022  2022  2022  2021  2021 
  (Dollars in Thousands, except per share amounts) 
Condensed Results of Operations:                    
Net interest income $15,398  $14,081  $11,864  $13,172  $14,114 
Provision (credit) for credit losses (1)  332   48   (76)  (1,470)  (700)
Total noninterest income  27,404   31,238   29,818   42,016   52,936 
Total noninterest expense  35,694   35,050   34,935   40,974   43,323 
Income before income taxes  6,776   10,221   6,823   15,684   24,427 
Income tax expense  1,506   2,231   1,532   3,131   5,427 
Net income $5,270  $7,990  $5,291  $12,553  $19,000 
Income per share – basic $0.25  $0.36  $0.23  $0.53  $0.80 
Income per share – diluted $0.25  $0.36  $0.23  $0.53  $0.79 
Dividends declared per share $0.20  $0.20  $0.20  $0.70  $0.20 
                     
Performance Ratios (annualized):                    
Return on average assets - QTD  1.08%  1.61%  1.00%  2.22%  3.38%
Return on average equity - QTD  5.38%  7.93%  5.00%  11.14%  17.25%
Net interest margin - QTD  3.34%  3.02%  2.38%  2.47%  2.68%
                     
Return on average assets - YTD  1.22%  1.30%  1.00%  3.20%  3.54%
Return on average equity - YTD  6.09%  6.42%  5.00%  16.38%  18.08%
Net interest margin - YTD  2.90%  2.69%  2.38%  2.68%  2.75%
                     
Asset Quality Ratios:                    
Past due loans to total loans  0.48%  0.60%  0.53%  0.59%  0.92%
Nonaccrual loans to total loans  0.37%  0.59%  0.55%  0.46%  0.32%
Nonperforming assets to total assets  0.27%  0.39%  0.34%  0.26%  0.18%
Allowance for credit losses to loans receivable (1)  1.29%  1.35%  1.40%  1.31%  1.37%

(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 
  September 30,  June 30,  March 31,  December 31,  September 30, 
  2022  2022  2022  2021  2021 
Average balances (Dollars in Thousands) 
Interest-earning assets                    
Loans receivable and held for sale $1,492,462  $1,433,452  $1,361,839  $1,517,984  $1,573,194 
Mortgage related securities  172,807   168,000   138,863   119,709   108,743 
Debt securities, federal funds sold and short term investments  162,211   269,823   519,116   475,574   409,559 
Total interest-earning assets  1,827,480   1,871,275   2,019,818   2,113,267   2,091,496 
Noninterest-earning assets  114,274   117,248   128,813   131,703   137,454 
Total assets $1,941,754  $1,988,523  $2,148,631  $2,244,970  $2,228,950 
                     
Interest-bearing liabilities                    
Demand accounts $75,058  $70,674  $69,736  $70,762  $68,478 
Money market, savings, and escrow accounts  398,643   412,321   404,413   398,210   391,599 
Certificates of deposit  586,012   584,244   610,681   643,546   663,343 
Total interest-bearing deposits  1,059,713   1,067,239   1,084,830   1,112,518   1,123,420 
Borrowings  296,111   326,068   440,252   481,971   475,000 
Total interest-bearing liabilities  1,355,824   1,393,307   1,525,082   1,594,489   1,598,420 
Noninterest-bearing demand deposits  153,591   154,070   152,900   153,303   153,436 
Noninterest-bearing liabilities  43,683   36,962   41,232   49,982   40,148 
Total liabilities  1,553,098   1,584,339   1,719,214   1,797,774   1,792,004 
Equity  388,656   404,184   429,417   447,196   436,946 
Total liabilities and equity $1,941,754  $1,988,523  $2,148,631  $2,244,970  $2,228,950 
                     
Average Yield/Costs (annualized)                    
Loans receivable and held for sale  4.32%  4.07%  4.02%  3.96%  4.07%
Mortgage related securities  2.07%  1.96%  1.76%  1.68%  1.72%
Debt securities, federal funds sold and short term investments  2.41%  1.56%  0.72%  0.77%  0.88%
Total interest-earning assets  3.93%  3.52%  3.02%  3.11%  3.32%
                     
Demand accounts  0.08%  0.09%  0.08%  0.08%  0.08%
Money market and savings accounts  0.21%  0.19%  0.21%  0.22%  0.24%
Certificates of deposit  0.51%  0.37%  0.37%  0.40%  0.42%
Total interest-bearing deposits  0.37%  0.28%  0.29%  0.31%  0.33%
Borrowings  2.34%  1.95%  2.20%  2.09%  2.04%
Total interest-bearing liabilities  0.80%  0.67%  0.84%  0.85%  0.84%


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, 
  2022  2022  2022  2021  2021 
  (Dollars in Thousands) 
Condensed Results of Operations:                    
Net interest income $15,507  $13,710  $11,652  $13,197  $14,090 
Provision (credit) for credit losses (1)  234   (41)  (140)  (1,500)  (750)
Total noninterest income  1,116   1,640   1,432   1,459   1,726 
Noninterest expenses:                    
Compensation, payroll taxes, and other employee benefits  4,424   4,596   5,212   5,085   5,360 
Occupancy, office furniture and equipment  955   876   937   960   909 
Advertising  213   244   227   278   233 
Data processing  539   531   608   531   531 
Communications  108   63   94   100   122 
Professional fees  123   118   114   151   130 
Real estate owned  1   -   5   14   1 
Loan processing expense  -   -   -   -   - 
Other  1,477   1,006   600   651   422 
Total noninterest expense  7,840   7,434   7,797   7,770   7,708 
Income before income taxes  8,549   7,957   5,427   8,386   8,858 
Income tax expense  1,983   1,658   1,167   1,690   2,092 
Net income $6,566  $6,299  $4,260  $6,696  $6,766 
                     
Efficiency ratio - QTD  47.16%  48.43%  59.59%  53.02%  48.74%
Efficiency ratio - YTD  51.20%  53.57%  59.59%  48.58%  47.21%

(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 
  September 30,  June 30,  March 31,  December 31,  September 30, 
  2022  2022  2022  2021  2021 
  (Dollars in Thousands) 
Condensed Results of Operations:                    
Net interest income $(155) $370  $183  $(49) $(2)
Provision (credit) for credit losses (2)  98   89   64   30   50 
Total noninterest income  27,305   30,126   28,604   40,692   51,290 
Noninterest expenses:                    
Compensation, payroll taxes, and other employee benefits  21,864   21,311   20,438   27,866   28,981 
Occupancy, office furniture and equipment  1,341   1,180   1,251   1,306   1,579 
Advertising  924   718   678   680   602 
Data processing  543   613   588   542   450 
Communications  194   195   246   221   209 
Professional fees  265   222   338   306   421 
Real estate owned  -   -   -   -   - 
Loan processing expense  1,120   1,134   1,431   940   1,135 
Other  2,571   2,733   2,309   1,445   2,270 
Total noninterest expense  28,822   28,106   27,279   33,306   35,647 
(Loss) income before income taxes  (1,770)  2,301   1,444   7,307   15,591 
Income tax (benefit) expense  (470)  578   377   1,443   3,341 
Net (loss) income $(1,300) $1,723  $1,067  $5,864  $12,250 
                     
Efficiency ratio - QTD  106.16%  92.16%  94.76%  81.95%  69.50%
Efficiency ratio - YTD  97.42%  93.42%  94.76%  71.44%  68.71%
                     
Loan originations $729,897  $778,760  $708,463  $993,113  $1,055,500 
Purchase  94.2%  90.4%  77.3%  73.8%  73.8%
Refinance  5.8%  9.6%  22.7%  26.2%  26.2%
Gross margin on loans sold(1)  3.80%  3.76%  4.00%  4.18%  4.54%

(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