Financial News

Waterstone Financial, Inc. Announces Results of Operations for the Quarter and Six Months Ended June 30, 2024

WAUWATOSA, Wis., July 25, 2024 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $5.7 million, or $0.31 per diluted share, for the quarter ended June 30, 2024 compared to net income of $4.0 million, or $0.20 per diluted share for the quarter ended June 30, 2023.  Net income per diluted share was $0.47 for the six months ended June 30, 2024, compared to net income per diluted share of $0.30 for the six months ended June 30, 2023.

“The results this quarter reflect our continued efforts over the past year to improve efficiencies at the Mortgage Banking segment,” said William Bruss, Chief Executive Officer of Waterstone Financial, Inc. "While our results have improved, we continue to face many challenges within the Mortgage Banking segment, as the mortgage banking industry continues to face unknown variables driven by consumer demand, affordable inventory, and interest rates. The Community Banking segment continues to deal with margin pressure, as short-term funding rates remain elevated due to the restrictive monetary policy of the Federal Reserve. Throughout this challenging period, we have maintained a robust share repurchase program that continues to return strong value to shareholders through repurchase activity that is accretive to book value." 

Highlights of the Quarter Ended June 30, 2024

Waterstone Financial, Inc. (Consolidated)

Consolidated net income of Waterstone Financial, Inc. totaled $5.7 million for the quarter ended June 30, 2024, compared to net income of $4.0 million for the quarter ended June 30, 2023.
Consolidated return on average assets was 1.02% for the quarter ended June 30, 2024, compared to 0.74% for the quarter ended June 30, 2023.
Consolidated return on average equity was 6.84% for the quarter ended June 30, 2024, and 4.41% for the quarter ended June 30, 2023.
Dividends declared during the quarter ended June 30, 2024, totaled $0.15 per common share.
During the quarter ended June 30, 2024, we repurchased approximately 481,000 shares at a cost (including the federal excise tax) of $5.8 million, or $11.99 per share. This share repurchase activity was accretive to book value per share in the amount of $0.13 during the quarter ended June 30, 2024. 
Nonperforming assets as a percentage of total assets was 0.25% at June 30, 2024, 0.23% at March 31, 2024, and 0.19% at June 30, 2023.  
Past due loans as a percentage of total loans was 0.76% at June 30, 2024, 0.64% at March 31, 2024, and 0.50% at June 30, 2023. 


Book value per share was $17.20 at June 30, 2024 and $16.94 at December 31, 2023. 

Community Banking Segment

Pre-tax income totaled $5.1 million for the quarter ended June 30, 2024, which represents a $1.3 million, or 20.5%, decrease compared to $6.4 million for the quarter ended June 30, 2023.
Net interest income totaled $11.2 million for the quarter ended June 30, 2024, which represents a $2.0 million, or 15.1%, decrease compared to $13.2 million for the quarter ended June 30, 2023.
Average loans held for investment totaled $1.67 billion during the quarter ended June 30, 2024, which represents an increase of $81.6 million, or 5.1%, compared to $1.59 billion for the quarter ended June 30, 2023. The increase was primarily due to increases in the construction and commercial real estate mortgages. Average loans held for investment increased $4.1 million compared to $1.66 billion for the quarter ended March 31, 2024. The increase was primarily due to increases in construction and commercial real estate mortgages.
Net interest margin decreased 46 basis points to 2.01% for the quarter ended June 30, 2024, compared to 2.47% for the quarter ended June 30, 2023, which was a result of an increase in weighted average cost of deposits and borrowings as the federal funds rate increases resulted in increased funding rates. Net interest margin decreased 14 basis points compared to 2.15% for the quarter ended March 31, 2024, driven by an increase in weighted average cost of deposits and borrowings as the short-term borrowing rates increased resulted in increased funding rates.
Past due loans at the community banking segment totaled $9.3 million at June 30, 2024, $8.1 million at March 31, 2024, and $5.7 million at June 30, 2023.
The segment had a negative provision for credit losses related to funded loans of $197,000 for the quarter ended June 30, 2024, compared to a provision for credit losses related to funded loans of $619,000 for the quarter ended June 30, 2023. The current quarter decrease was primarily due to decrease to historical loss rates and improvements in certain internal asset quality metrics offset by an adjustment in the qualitative factors primarily related to increases in economic risks related to commercial real estate loans during the quarter. The negative provision for credit losses related to unfunded loan commitments was $82,000 for the quarter ended June 30, 2024, compared to a negative provision for credit losses related to unfunded loan commitments of $462,000 for the quarter ended June 30, 2023. The negative provision for credit losses related to unfunded loan commitments for the quarter ended June 30, 2024, was due primarily to a decrease of loans that are currently waiting to be funded compared to the prior quarter end.
The efficiency ratio, a non-GAAP ratio, was 62.37% for the quarter ended June 30, 2024, compared to 55.81% for the quarter ended June 30, 2023.


Average deposits (excluding escrow accounts) totaled $1.22 billion during the quarter ended June 30, 2024, an increase of $35.7 million, or 3.0%, compared to $1.18 billion during the quarter ended June 30, 2023. Average deposits increased $28.8 million, or 9.7% annualized, compared to $1.19 billion for the quarter ended March 31, 2024.

Mortgage Banking Segment

Pre-tax income totaled $2.0 million for the quarter ended June 30, 2024, compared to $1.4 million of pre-tax loss for the quarter ended June 30, 2023.
Loan originations increased $10.8 million, or 1.7%, to $634.1 million during the quarter ended June 30, 2024, compared to $623.3 million during the quarter ended June 30, 2023. Origination volume relative to purchase activity accounted for 92.7% of originations for the quarter ended June 30, 2024, compared to 96.4% of total originations for the quarter ended June 30, 2023.
Mortgage banking non-interest income increased $2.0 million, or 8.9%, to $25.1 million for the quarter ended June 30, 2024, compared to $23.0 million for the quarter ended June 30, 2023.
Gross margin on loans sold totaled 3.93% for the quarter ended June 30, 2024, compared to 3.73% for the quarter ended June 30, 2023.
During the quarter ended June 30, 2024, the Company sold mortgage servicing rights related to $233.1 million in loans receivable and with a book value of $2.0 million for $2.1 million resulting in a gain on sale of $152,000. There was no comparable sale during the quarter ended June 30, 2023.


Total compensation, payroll taxes and other employee benefits decreased $1.0 million, or 5.8%, to $16.9 million during the quarter ended June 30, 2024, compared to $17.9 million during the quarter ended June 30, 2023. The decrease primarily related to decreased salary expense and health insurance expense driven by reduced employee headcount and lower claims.

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; 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.

Non-GAAP Financial Measures 

Management uses non-GAAP financial information in its analysis of the Company's performance. Management believes that this non-GAAP measure provides a greater understanding of ongoing operations and enhance comparability of results of operations with prior periods. The Company’s management believes that investors may use this non-GAAP measure to analyze the Company's financial performance without the impact of unusual items or events that may obscure trends in the Company’s underlying performance. This non-GAAP data should be considered in addition to results prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP results. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in this measure and that different companies might calculate this measure differently.

 
WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
  For The Three Months Ended June 30,  For The Six Months Ended June 30, 
  2024  2023  2024  2023 
  (In Thousands, except per share amounts) 
Interest income:                
Loans $25,601  $22,150  $50,085  $42,035 
Mortgage-related securities  1,125   969   2,223   1,912 
Debt securities, federal funds sold and short-term investments  1,294   1,128   2,617   2,190 
Total interest income  28,020   24,247   54,925   46,137 
Interest expense:                
Deposits  9,716   5,955   18,686   10,043 
Borrowings  7,625   5,617   14,423   9,624 
Total interest expense  17,341   11,572   33,109   19,667 
Net interest income  10,679   12,675   21,816   26,470 
Provision (credit) for credit losses  (225)  186   (158)  646 
Net interest income after provision (credit) for loan losses  10,904   12,489   21,974   25,824 
Noninterest income:                
Service charges on loans and deposits  465   611   889   1,041 
Increase in cash surrender value of life insurance  804   714   1,152   1,039 
Mortgage banking income  24,838   21,914   44,906   38,684 
Other  390   286   798   1,315 
Total noninterest income  26,497   23,525   47,745   42,079 
Noninterest expenses:                
Compensation, payroll taxes, and other employee benefits  21,762   22,395   41,638   42,447 
Occupancy, office furniture, and equipment  2,029   2,046   4,137   4,309 
Advertising  987   944   1,901   1,833 
Data processing  1,242   1,090   2,448   2,212 
Communications  240   225   466   476 
Professional fees  758   618   1,501   1,034 
Real estate owned  1   1   14   2 
Loan processing expense  861   932   1,907   1,950 
Other  2,379   2,671   3,797   5,766 
Total noninterest expenses  30,259   30,922   57,809   60,029 
Income before income taxes  7,142   5,092   11,910   7,874 
Income tax expense  1,430   1,085   3,160   1,712 
Net income $5,712  $4,007  $8,750  $6,162 
Income per share:                
Basic $0.31  $0.20  $0.47  $0.30 
Diluted $0.31  $0.20  $0.47  $0.30 
Weighted average shares outstanding:                
Basic  18,524   20,384   18,772   20,635 
Diluted  18,568   20,431   18,802   20,702 


WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 
  June 30,  December 31, 
  2024  2023 
  (Unaudited)     
Assets (In Thousands, except per share amounts) 
Cash $36,177  $30,667 
Federal funds sold  4,873   5,493 
Interest-earning deposits in other financial institutions and other short-term investments  266   261 
Cash and cash equivalents  41,316   36,421 
Securities available for sale (at fair value)  204,835   204,907 
Loans held for sale (at fair value)  222,756   164,993 
Loans receivable  1,678,767   1,664,215 
Less: Allowance for credit losses ("ACL") - loans  18,414   18,549 
Loans receivable, net  1,660,353   1,645,666 
         
Office properties and equipment, net  19,663   19,995 
Federal Home Loan Bank stock (at cost)  23,220   20,880 
Cash surrender value of life insurance  69,191   67,859 
Real estate owned, net  145   254 
Prepaid expenses and other assets  48,135   52,414 
Total assets $2,289,614  $2,213,389 
         
Liabilities and Shareholders' Equity        
Liabilities:        
Demand deposits $182,628  $187,107 
Money market and savings deposits  274,685   273,233 
Time deposits  766,610   730,284 
Total deposits  1,223,923   1,190,624 
         
Borrowings  660,824   611,054 
Advance payments by borrowers for taxes  21,136   6,607 
Other liabilities  48,785   61,048 
Total liabilities  1,954,668   1,869,333 
         
Shareholders' equity:        
Preferred stock  -   - 
Common stock  195   203 
Additional paid-in capital  92,964   103,908 
Retained earnings  272,778   269,606 
Unearned ESOP shares  (11,276)  (11,869)
Accumulated other comprehensive loss, net of taxes  (19,715)  (17,792)
Total shareholders' equity  334,946   344,056 
Total liabilities and shareholders' equity $2,289,614  $2,213,389 
         
Share Information        
Shares outstanding  19,479   20,315 
Book value per share $17.20  $16.94 


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, 
  2024  2024  2023  2023  2023 
  (Dollars in Thousands, except per share amounts) 
Condensed Results of Operations:                    
Net interest income $10,679  $11,137  $11,756  $11,989  $12,675 
Provision (credit) for credit losses  (225)  67   (435)  445   186 
Total noninterest income  26,497   21,248   16,876   22,230   23,525 
Total noninterest expense  30,259   27,550   29,662   30,021   30,922 
Income (loss) before income taxes (benefit)  7,142   4,768   (595)  3,753   5,092 
Income tax expense (benefit)  1,430   1,730   (555)  500   1,085 
Net income (loss) $5,712  $3,038  $(40) $3,253  $4,007 
Income (loss) per share – basic $0.31  $0.16  $(0.00) $0.16  $0.20 
Income (loss) per share – diluted $0.31  $0.16  $(0.00) $0.16  $0.20 
Dividends declared per common share $0.15  $0.15  $0.15  $0.15  $0.20 
                     
Performance Ratios (annualized):                    
Return on average assets - QTD  1.02%  0.56%  (0.01)%  0.58%  0.74%
Return on average equity - QTD  6.84%  3.56%  (0.05)%  3.63%  4.41%
Net interest margin - QTD  2.01%  2.15%  2.25%  2.26%  2.47%
                     
Return on average assets - YTD  0.79%  0.56%  0.44%  0.59%  0.59%
Return on average equity - YTD  5.17%  3.56%  2.62%  3.46%  3.37%
Net interest margin - YTD  2.08%  2.15%  2.46%  2.53%  2.67%
                     
Asset Quality Ratios:                    
Past due loans to total loans  0.76%  0.64%  0.68%  0.53%  0.50%
Nonaccrual loans to total loans  0.33%  0.29%  0.29%  0.25%  0.26%
Nonperforming assets to total assets  0.25%  0.23%  0.23%  0.20%  0.19%
Allowance for credit losses - loans to loans receivable  1.10%  1.11%  1.11%  1.12%  1.14%


WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF QUARTERLY AVERAGE BALANCES AND YIELD/COSTS
(Unaudited)
 
  At or For the Three Months Ended 
  June 30,  March 31,  December 31,  September 30,  June 30, 
  2024  2024  2023  2023  2023 
Average balances (Dollars in Thousands) 
Interest-earning assets                    
Loans receivable and held for sale $1,859,608  $1,805,102  $1,797,988  $1,797,233  $1,759,001 
Mortgage related securities  171,895   172,077   172,863   174,202   171,938 
Debt securities, federal funds sold and short-term investments  107,992   110,431   106,504   132,935   123,195 
Total interest-earning assets  2,139,495   2,087,610   2,077,355   2,104,370   2,054,134 
Noninterest-earning assets  104,019   103,815   105,073   105,714   108,320 
Total assets $2,243,514  $2,191,425  $2,182,428  $2,210,084  $2,162,454 
                     
Interest-bearing liabilities                    
Demand accounts $91,300  $87,393  $91,868  $90,623  $69,147 
Money market, savings, and escrow accounts  293,483   281,171   302,121   306,806   305,576 
Certificates of deposit  758,252   739,543   735,418   719,708   695,310 
Total interest-bearing deposits  1,143,035   1,108,107   1,129,407   1,117,137   1,070,033 
Borrowings  622,771   602,724   549,210   584,764   551,545 
Total interest-bearing liabilities  1,765,806   1,710,831   1,678,617   1,701,901   1,621,578 
Noninterest-bearing demand deposits  93,637   92,129   102,261   106,042   130,291 
Noninterest-bearing liabilities  48,315   45,484   56,859   46,805   46,446 
Total liabilities  1,907,758   1,848,444   1,837,737   1,854,748   1,798,315 
Equity  335,756   342,981   344,691   355,336   364,139 
Total liabilities and equity $2,243,514  $2,191,425  $2,182,428  $2,210,084  $2,162,454 
                     
Average Yield/Costs (annualized)                    
Loans receivable and held for sale  5.54%  5.46%  5.36%  5.26%  5.05%
Mortgage related securities  2.63%  2.57%  2.48%  2.41%  2.26%
Debt securities, federal funds sold and short-term investments  4.82%  4.82%  4.94%  4.45%  3.67%
Total interest-earning assets  5.27%  5.18%  5.10%  4.97%  4.73%
                     
Demand accounts  0.11%  0.11%  0.11%  0.11%  0.09%
Money market and savings accounts  1.89%  1.79%  1.64%  1.54%  1.42%
Certificates of deposit  4.41%  4.19%  3.76%  3.43%  2.80%
Total interest-bearing deposits  3.42%  3.26%  2.90%  2.64%  2.23%
Borrowings  4.92%  4.54%  4.83%  4.71%  4.08%
Total interest-bearing liabilities  3.95%  3.71%  3.53%  3.35%  2.86%

  

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, 
  2024  2024  2023  2023  2023 
  (Dollars in Thousands) 
Condensed Results of Operations:                    
Net interest income $11,234  $11,598  $12,056  $12,431  $13,238 
Provision (credit) for credit losses  (279)  105   (550)  445   158 
Total noninterest income  1,491   990   894   966   1,540 
Noninterest expenses:                    
Compensation, payroll taxes, and other employee benefits  5,116   5,360   5,397   4,618   4,683 
Occupancy, office furniture and equipment  983   1,000   916   852   873 
Advertising  229   174   363   200   230 
Data processing  687   693   626   672   602 
Communications  72   65   75   70   72 
Professional fees  177   208   186   176   146 
Real estate owned  1   13   1   1   1 
Loan processing expense  -   -   -   -   - 
Other  672   691   628   703   1,641 
Total noninterest expense  7,937   8,204   8,192   7,292   8,248 
Income before income taxes  5,067   4,279   5,308   5,660   6,372 
Income tax expense  718   1,639   1,234   1,121   1,182 
Net income $4,349  $2,640  $4,074  $4,539  $5,190 
                     
Efficiency ratio - QTD (non-GAAP)  62.37%  65.17%  63.26%  54.43%  55.81%
Efficiency ratio - YTD (non-GAAP)  63.77%  65.17%  56.86%  54.94%  55.17%


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, 
  2024  2024  2023  2023  2023 
  (Dollars in Thousands) 
Condensed Results of Operations:                    
Net interest loss $(552) $(541) $(367) $(550) $(622)
Provision for credit losses  54   (38)  115   -   28 
Total noninterest income  25,081   20,328   16,028   21,452   23,041 
Noninterest expenses:                    
Compensation, payroll taxes, and other employee benefits  16,886   14,756   14,881   17,186   17,929 
Occupancy, office furniture and equipment  1,046   1,108   1,105   1,141   1,173 
Advertising  758   740   667   716   714 
Data processing  549   508   583   551   480 
Communications  168   161   194   173   153 
Professional fees  569   520   704   564   466 
Real estate owned  -   -   -   -   - 
Loan processing expense  861   1,046   756   722   932 
Other  1,641   617   2,701   1,935   1,914 
Total noninterest expense  22,478   19,456   21,591   22,988   23,761 
Income (loss) before income taxes (benefit)  1,997   369   (6,045)  (2,086)  (1,370)
Income tax expense (benefit)  684   71   (1,827)  (657)  (126)
Net income (loss) $1,313  $298  $(4,218) $(1,429) $(1,244)
                     
Efficiency ratio - QTD (non-GAAP)  91.64%  98.33%  137.86%  109.98%  105.99%
Efficiency ratio - YTD (non-GAAP)  94.62%  98.33%  116.99%  111.63%  112.49%
                     
Loan originations $634,109  $485,109  $458,363  $597,562  $623,342 
Purchase  92.7%  93.0%  95.7%  95.4%  96.4%
Refinance  7.3%  7.0%  4.3%  4.6%  3.6%
Gross margin on loans sold(1)  3.93%  4.10%  3.51%  3.62%  3.73%

(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
markgerke@wsbonline.com


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