WAUWATOSA, Wis., Oct. 23, 2018 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $8.7 million, or $0.31 per diluted share for the quarter ended September 30, 2018 compared to $7.4 million, or $0.26 per diluted share for the quarter ended September 30, 2017. Net income per diluted share was $0.90 for the nine months ended September 30, 2018 compared to net income per diluted share of $0.82 for the nine months ended September 30, 2017.
"We executed a strong third quarter performance with net income of $8.7 million and earnings per share of $0.31," said Douglas Gordon, CEO of Waterstone Financial, Inc. "We followed up a record 2nd quarter net income with record net income for a 3rd quarter, based largely upon the strength of the Community Banking segment. The Community Banking segment had a 36.4% growth in net income which reflected continued net interest margin improvement and expense management. The Mortgage Banking segment underperformed last year's profitability due to margin compression in the third quarter of 2018 which resulted in greater branch losses. The industry continues to face pressures as market competition remains strong from lower refinancing activity and diminished levels of housing inventory. In an effort to improve profitability, we closed a number of underperforming branches which negatively impacted the bottom line for the quarter. However, we achieved a record origination month in August due to the addition of the New Mexico branch at the end of the second quarter."
Highlights of the Quarter Ended September 30, 2018
Waterstone Financial, Inc. (Consolidated)
- Consolidated net income of Waterstone Financial, Inc. totaled $8.7 million for the quarter ended September 30, 2018, compared to $7.4 million for the quarter ended September 30, 2017.
- Consolidated return on average assets totaled 1.80% for the quarter ended September 30, 2018 compared to 1.56% for the quarter ended September 30, 2017.
- Consolidated return on average equity increased 136 bps to 8.48% for the quarter ended September 30, 2018 compared to 7.12% for the quarter ended September 30, 2017.
- The effective income tax rate amounted to 24.0% for the quarter ended September 30, 2018 compared to 37.1% for the quarter ended September 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 September 30, 2018 amounting to a total of $0.86 in dividends declared per share during the nine months ended September 30, 2018.
- Repurchased a total 321,900 shares on the open market during the quarter ended September 30, 2018 at an average price of $17.02 per share. For the nine months ended, repurchased a total of 527,500 shares at an average price of $17.06.
Community Banking Segment
- Pre-tax income of the segment totaled $8.6 million for the quarter ended September 30, 2018, which represents a 15.8% increase compared to $7.5 million for the quarter ended September 30, 2017.
- Net interest income of the segment totaled $14.1 million for the quarter ended September 30, 2018, which represents a 7.6% increase compared to $13.1 million for the quarter ended September 30, 2017. Our net interest margin increased 12 bps to 3.07% for the quarter ended September 30, 2018 compared to 2.95% for the quarter ended September 30, 2017, which was driven by loan growth along with a decrease in borrowing costs.
- Noninterest income increased $151,000 million for the quarter ended September 30, 2018 compared to the quarter ended September 30, 2017 as fees earned on loans increased.
- Noninterest expenses decreased for the quarter ended September 30, 2018 compared to the quarter ended September 30, 2017 as compensation and real estate owned expenses decreased.
- Driven by net interest margin expansion and continued cost control efforts, the efficiency ratio for the community banking segment improved to 44.1% for the quarter ended September 30, 2018, compared to 47.8% for the quarter ended September 30, 2017. This was a quarterly record for the Community Banking Segment.
- Average loans held for investment totaled $1.34 billion during the quarter ended September 30, 2018, which represents an increase of $91.3 million, or 7.3% over the comparable quarter in the prior year.
- Average deposits totaled $1.01 billion during the quarter ended September 30, 2018, which represents an increase of $48.3 million, or 5.0%, over the comparable quarter in the prior year.
- Nonperforming assets as percentage of total assets was 0.45% at September 30, 2018 and June 30, 2018 and 0.62% at September 30, 2017.
Mortgage Banking Segment
- Pre-tax income of the segment totaled $2.8 million for the quarter ended September 30, 2018, which represents a 35.0% decrease compared to $4.3 million for the quarter ended September 30, 2017.
- Loan originations increased $76.7 million, or 11.2%, to $761.2 million during the quarter ended September 30, 2018, compared to $684.5 million during the quarter ended September 30, 2017. Origination volume relative to purchase activity accounted for 92.1% of originations for the quarter ended September 30, 2018 compared to 89.6% of total originations for the quarter ended September 30, 2017.
- Gross margins on loans sold decreased approximately 10% during the quarter ended September 30, 2018, compared to the quarter ended September 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 September 30, | For The Nine Months Ended September 30, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| (In Thousands, except per share amounts) | |||||||||||||||
| Interest income: | |||||||||||||||
| Loans | $ | 17,340 | 15,855 | 49,498 | 45,078 | ||||||||||
| Mortgage-related securities | 643 | 647 | 1,925 | 2,021 | |||||||||||
| Debt securities, federal funds sold and short-term investments | 1,063 | 951 | 2,949 | 2,680 | |||||||||||
| Total interest income | 19,046 | 17,453 | 54,372 | 49,779 | |||||||||||
| Interest expense: | |||||||||||||||
| Deposits | 3,063 | 1,981 | 8,087 | 5,614 | |||||||||||
| Borrowings | 2,133 | 2,439 | 5,574 | 6,756 | |||||||||||
| Total interest expense | 5,196 | 4,420 | 13,661 | 12,370 | |||||||||||
| Net interest income | 13,850 | 13,033 | 40,711 | 37,409 | |||||||||||
| Provision for loan losses | 40 | 20 | (1,060 | ) | (1,166 | ) | |||||||||
| Net interest income after provision for loan losses | 13,810 | 13,013 | 41,771 | 38,575 | |||||||||||
| Noninterest income: | |||||||||||||||
| Service charges on loans and deposits | 442 | 300 | 1,332 | 1,148 | |||||||||||
| Increase in cash surrender value of life insurance | 695 | 688 | 1,496 | 1,476 | |||||||||||
| Loss on sale of available for sale securities | - | - | - | (107 | ) | ||||||||||
| Mortgage banking income | 32,653 | 31,863 | 88,930 | 92,774 | |||||||||||
| Other | 272 | 203 | 805 | 941 | |||||||||||
| Total noninterest income | 34,062 | 33,054 | 92,563 | 96,232 | |||||||||||
| Noninterest expenses: | |||||||||||||||
| Compensation, payroll taxes, and other employee benefits | 27,453 | 26,153 | 74,670 | 73,732 | |||||||||||
| Occupancy, office furniture, and equipment | 2,751 | 2,533 | 7,995 | 7,587 | |||||||||||
| Advertising | 1,224 | 821 | 3,084 | 2,414 | |||||||||||
| Data processing | 809 | 623 | 2,057 | 1,854 | |||||||||||
| Communications | 412 | 394 | 1,229 | 1,170 | |||||||||||
| Professional fees | 583 | 629 | 1,930 | 1,953 | |||||||||||
| Real estate owned | (128 | ) | (20 | ) | 63 | 258 | |||||||||
| FDIC insurance premiums | 131 | 129 | 361 | 366 | |||||||||||
| Other | 3,191 | 3,054 | 9,921 | 10,227 | |||||||||||
| Total noninterest expenses | 36,426 | 34,316 | 101,310 | 99,561 | |||||||||||
| Income before income taxes | 11,446 | 11,751 | 33,024 | 35,246 | |||||||||||
| Income tax expense | 2,743 | 4,362 | 7,948 | 12,397 | |||||||||||
| Net income | $ | 8,703 | 7,389 | 25,076 | 22,849 | ||||||||||
| Income per share: | |||||||||||||||
| Basic | $ | 0.32 | 0.27 | 0.91 | 0.83 | ||||||||||
| Diluted | $ | 0.31 | 0.26 | 0.90 | 0.82 | ||||||||||
| Weighted average shares outstanding: | |||||||||||||||
| Basic | 27,451 | 27,532 | 27,488 | 27,449 | |||||||||||
| Diluted | 27,680 | 27,953 | 27,765 | 27,927 | |||||||||||
| WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES | |||||||
| CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | |||||||
| September 30, | December 31, | ||||||
| 2018 | 2017 | ||||||
| (Unaudited) | |||||||
| Assets | (In Thousands, except per share amounts) | ||||||
| Cash | $ | 32,966 | $ | 22,306 | |||
| Federal funds sold | 18,352 | 17,034 | |||||
| Interest-earning deposits in other financial institutions and other short term investments | 7,538 | 9,267 | |||||
| Cash and cash equivalents | 58,856 | 48,607 | |||||
| Securities available for sale (at fair value) | 179,076 | 199,707 | |||||
| Loans held for sale (at fair value) | 192,674 | 149,896 | |||||
| Loans receivable | 1,357,656 | 1,291,814 | |||||
| Less: Allowance for loan losses | 13,226 | 14,077 | |||||
| Loans receivable, net | 1,344,430 | 1,277,737 | |||||
| Office properties and equipment, net | 22,417 | 22,941 | |||||
| Federal Home Loan Bank stock (at cost) | 19,575 | 16,875 | |||||
| Cash surrender value of life insurance | 67,198 | 65,996 | |||||
| Real estate owned, net | 2,170 | 4,558 | |||||
| Prepaid expenses and other assets | 33,007 | 20,084 | |||||
| Total assets | $ | 1,919,403 | $ | 1,806,401 | |||
| Liabilities and Shareholders' Equity | |||||||
| Liabilities: | |||||||
| Demand deposits | $ | 130,969 | $ | 129,597 | |||
| Money market and savings deposits | 159,742 | 148,804 | |||||
| Time deposits | 713,739 | 688,979 | |||||
| Total deposits | 1,004,450 | 967,380 | |||||
| Borrowings | 451,132 | 386,285 | |||||
| Advance payments by borrowers for taxes | 30,460 | 4,876 | |||||
| Other liabilities | 28,717 | 35,756 | |||||
| Total liabilities | 1,514,759 | 1,394,297 | |||||
| Shareholders' equity: | |||||||
| Common stock | 291 | 295 | |||||
| Additional paid-in capital | 329,743 | 326,655 | |||||
| Retained earnings | 184,697 | 183,358 | |||||
| Unearned ESOP shares | (18,101 | ) | (18,991 | ) | |||
| Accumulated other comprehensive loss, net of taxes | (3,808 | ) | (477 | ) | |||
| Cost of shares repurchased | (88,178 | ) | (78,736 | ) | |||
| Total shareholders' equity | 404,644 | 412,104 | |||||
| Total liabilities and shareholders' equity | $ | 1,919,403 | $ | 1,806,401 | |||
| Share Information | |||||||
| Shares Outstanding | 29,050 | 29,501 | |||||
| Book Value per share | $ | 13.93 | $ | 13.97 | |||
| Closing market price | $ | 17.15 | $ | 17.05 | |||
| Price to book ratio | 123.12 | % | 122.05 | % | |||
| 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, | |||||||||||||||
| 2018 | 2018 | 2018 | 2017 | 2017 | |||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||
| Condensed Results of Operations: | |||||||||||||||||||
| Net interest income | $ | 13,850 | $ | 13,720 | 13,141 | 13,324 | 13,033 | ||||||||||||
| Provision for loan losses | 40 | (220 | ) | (880 | ) | - | 20 | ||||||||||||
| Total noninterest income | 34,062 | 33,318 | 25,183 | 28,181 | 33,054 | ||||||||||||||
| Total noninterest expense | 36,426 | 34,737 | 30,147 | 32,318 | 34,316 | ||||||||||||||
| Income before income taxes | 11,446 | 12,521 | 9,057 | 9,187 | 11,751 | ||||||||||||||
| Income tax expense | 2,743 | 3,101 | 2,104 | 6,072 | 4,362 | ||||||||||||||
| Net income | $ | 8,703 | $ | 9,420 | 6,953 | 3,115 | 7,389 | ||||||||||||
| Income per share – basic | $ | 0.32 | $ | 0.34 | 0.25 | 0.11 | 0.27 | ||||||||||||
| Income per share – diluted | $ | 0.31 | $ | 0.34 | 0.25 | 0.11 | 0.26 | ||||||||||||
| Dividends declared per share | $ | 0.12 | $ | 0.12 | 0.62 | 0.12 | 0.12 | ||||||||||||
| Performance Ratios: | |||||||||||||||||||
| Return on average assets - QTD | 1.80 | % | 2.02 | % | 1.57 | % | 0.67 | % | 1.56 | % | |||||||||
| Return on average equity - QTD | 8.48 | % | 9.40 | % | 6.90 | % | 2.98 | % | 7.12 | % | |||||||||
| Net interest margin - QTD | 3.07 | % | 3.14 | % | 3.18 | % | 3.08 | % | 2.95 | % | |||||||||
| Return on average assets - YTD | 1.80 | % | 1.80 | % | 1.57 | % | 1.43 | % | 1.70 | % | |||||||||
| Return on average equity - YTD | 8.25 | % | 8.13 | % | 6.90 | % | 6.32 | % | 7.42 | % | |||||||||
| Net interest margin - YTD | 3.13 | % | 3.16 | % | 3.18 | % | 3.00 | % | 2.97 | % | |||||||||
| Asset Quality Ratios: | |||||||||||||||||||
| Past due loans to total loans | 0.67 | % | 0.54 | % | 0.53 | % | 0.45 | % | 0.71 | % | |||||||||
| Non accrual loans to total loans | 0.48 | % | 0.46 | % | 0.50 | % | 0.47 | % | 0.56 | % | |||||||||
| Non performing assets to total assets | 0.45 | % | 0.45 | % | 0.54 | % | 0.59 | % | 0.62 | % | |||||||||
| 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, | |||||||||||||||
| 2018 | 2018 | 2018 | 2017 | 2017 | |||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||
| Condensed Results of Operations: | |||||||||||||||||||
| Net interest income | $ | 14,121 | $ | 13,747 | 13,304 | 13,375 | 13,120 | ||||||||||||
| Provision for loan losses | - | (250 | ) | (900 | ) | - | - | ||||||||||||
| Total noninterest income | 1,312 | 1,137 | 939 | 974 | 1,161 | ||||||||||||||
| Total noninterest expense | 6,800 | 6,588 | 7,682 | 6,939 | 6,824 | ||||||||||||||
| Income before income taxes | 8,633 | 8,546 | 7,461 | 7,410 | 7,457 | ||||||||||||||
| Income tax expense | 2,003 | 1,970 | 1,668 | 5,570 | 2,597 | ||||||||||||||
| Net income | $ | 6,630 | $ | 6,576 | 5,793 | 1,840 | 4,860 | ||||||||||||
| Efficiency ratio - QTD | 44.06 | % | 44.27 | % | 53.94 | % | 48.36 | % | 47.78 | % | |||||||||
| Efficiency ratio - YTD | 47.28 | % | 49.00 | % | 53.94 | % | 49.98 | % | 50.56 | % | |||||||||
| 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, | |||||||||||||||
| 2018 | 2018 | 2018 | 2017 | 2017 | |||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||
| Condensed Results of Operations: | |||||||||||||||||||
| Net interest income | $ | (286 | ) | $ | (40 | ) | (192 | ) | (72 | ) | (102 | ) | |||||||
| Provision for loan losses | 40 | 30 | 20 | - | 20 | ||||||||||||||
| Total noninterest income | 33,165 | 32,547 | 24,731 | 27,645 | 32,318 | ||||||||||||||
| Total noninterest expense | 30,036 | 28,493 | 22,941 | 25,791 | 27,882 | ||||||||||||||
| Income before income taxes | 2,803 | 3,984 | 1,578 | 1,782 | 4,314 | ||||||||||||||
| Income tax expense | 737 | 1,133 | 435 | 509 | 1,767 | ||||||||||||||
| Net income | $ | 2,066 | $ | 2,851 | 1,143 | 1,273 | 2,547 | ||||||||||||
| Efficiency ratio - QTD | 91.35 | % | 87.65 | % | 93.49 | % | 93.54 | % | 86.55 | % | |||||||||
| Efficiency ratio - YTD | 90.60 | % | 90.16 | % | 93.49 | % | 86.93 | % | 85.00 | % | |||||||||
| Loan Originations | 761,206 | 721,184 | 516,020 | 600,265 | 684,500 | ||||||||||||||
| Purchase | 92.1 | % | 92.6 | % | 85.1 | % | 86.7 | % | 89.6 | % | |||||||||
| Refinance | 7.9 | % | 7.4 | % | 14.9 | % | 13.3 | % | 10.4 | % | |||||||||
Contact: Mark R. Gerke
Chief Financial Officer
414.459.4012
markgerke@wsbonline.com