WAUWATOSA, Wis., Jan. 30, 2024 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported a net loss of $40,000, or less than $0.01 per diluted share, for the quarter ended December 31, 2023, compared to net income of $935,000, or $0.04 per diluted share for the quarter ended December 31, 2022. Net income per diluted share was $0.46 for the twelve months ended December 31, 2023, compared to net income per diluted share of $0.89 for the twelve months ended December 31, 2022.

“The current market dynamics continue to present challenges for both our Community Banking and Mortgage Banking segments,” said William Bruss, Chief Executive Officer of Waterstone Financial, Inc.  "The rapid rise in short-term interest rates and an inverted yield curve continue to create downward pressure on the net interest margin of the Community Banking segment.  In addition, the housing market continues to be adversely impacted by elevated interest rates, which have resulted in low levels of inventory and a decrease in housing affordability.  As is the case for the overall mortgage banking industry, the results of operations within our Mortgage Banking segment have been negatively impacted by declining mortgage origination volumes and compressed margins.  Despite these challenges, our strong asset quality and robust level of capital allowed us to continue to provide strong shareholder returns throughout 2023.  During the year ended December 31, 2023, we declared dividends of $0.70 per share and repurchased 1.9 million shares of our stock at an average price well below our current book value per share.”

Highlights of the Quarter Ended December 31, 2023

Waterstone Financial, Inc. (Consolidated)

  • Consolidated net loss of Waterstone Financial, Inc. totaled $40,000 for the quarter ended December 31, 2023, compared to net income of $935,000 for the quarter ended December 31, 2022.
  • Consolidated return on average assets was (0.01)% for the quarter ended December 31, 2023, compared to 0.19% for the quarter ended December 31, 2022.
  • Consolidated return on average equity was (0.05)% for the quarter ended December 31, 2023, and 0.99% for the quarter ended December 31, 2022
  • Dividends declared during the quarter ended December 31, 2023, totaled $0.15 per common share.
  • During the quarter ended December 31, 2023, we repurchased approximately 545,000 shares at a cost (including the federal excise tax) of $6.2 million, or $11.36 per share.  This share repurchase activity was accretive to book value per share in the amount of $0.14 during the quarter ended December 31, 2023. 
  • During the year ended December 31, 2023, we repurchased approximately 1.9 million shares at a cost (including the federal excise tax) of $26.0 million, or $13.38 per share. This share repurchase activity was accretive to book value per share in the $0.32 during the year ended December 31, 2023.
  • Nonperforming assets as percentage of total assets was 0.23% at December 31, 2023, 0.20% at September 30, 2023, and 0.22% at December 31, 2022.  
  • Past due loans as a percentage of total loans was 0.68% at December 31, 2023, 0.53% at September 30, 2023, and 0.41% at December 31, 2022. 
  • Book value per share was $16.94 at December 31, 2023, and $16.71 at December 31, 2022. 

Community Banking Segment

  • Pre-tax income totaled $5.3 million for the quarter ended December 31, 2023, which represents a $1.7 million, or 24.3%, decrease compared to $7.0 million for the quarter ended December 31, 2022.
  • Past due loans at the community banking segment totaled $7.9 million at December 31, 2023, $6.7 million at September 30, 2023, and $4.8 million at December 31, 2022. 
  • Net interest income totaled $12.1 million for the quarter ended December 31, 2023, which represents a $3.7 million, or 23.4%, decrease compared to $15.7 million for the quarter ended December 31, 2022.
  • Average loans held for investment totaled $1.66 billion during the quarter ended December 31, 2023, which represents an increase of $247.2 million, or 17.5%, compared to $1.41 billion for the quarter ended December 31, 2022. The increase was primarily due to increases in the single-family, multi-family, and commercial real estate mortgages. Average loans held for investment increased $33.1 million compared to $1.63 billion for the quarter ended September 30, 2023. The increase was primarily due to an increase in single-family and commercial real estate mortgages.
  • Net interest margin decreased 104 basis points to 2.25% for the quarter ended December 31, 2023, compared to 3.29% for the quarter ended December 31, 2022, 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 one basis point compared to 2.26% for the quarter ended September 30, 2023, driven by an increase in weighted average cost of deposits and borrowings as the federal funds rate increases resulted in increased funding rates. 
  • The segment had a negative provision for credit losses related to funded loans of $17,000 for the quarter ended December 31, 2023, compared to a provision for credit losses related to funded loans of $290,000 for the quarter ended December 31, 2022.  The current quarter decrease was primarily due to historical loss rates continuing to decrease. The negative provision for credit losses related to unfunded loan commitments was $533,000 for the quarter ended December 31, 2023, compared to a provision for credit losses related to unfunded loan commitments of $334,000 for the quarter ended December 31, 2022. The decrease for the quarter ended December 31, 2023, was due primarily to a decrease of loans in the loan commitment pipeline as loan activity decreased during the quarter and loans from the prior quarter pipeline funded.  
  • The efficiency ratio, a non-GAAP ratio, was 63.26% for the quarter ended December 31, 2023, compared to 54.49% for the quarter ended December 31, 2022.
  • Average deposits (excluding escrow accounts) totaled $1.21 billion during the quarter ended December 31, 2023, a decrease of $1.7 million, or 0.1%, compared to $1.21 billion during the quarter ended December 31, 2022. Average deposits increased $10.4 million, or 3.5% annualized, compared to the $1.20 billion for the quarter ended September 30, 2023.  
  • Other noninterest expense decreased $1.8 million to $628,000 during the quarter ended December 31, 2023, compared to $2.5 million during the quarter ended December 31, 2022. The decrease was driven by fees paid to the mortgage banking segment for the purchase of single-family adjustable-rate mortgage loans.  These fees totaled $44,000 during the quarter ended December 31, 2023, compared to $2.0 million during the quarter ended December 31, 2022.

Mortgage Banking Segment

  • Pre-tax loss totaled $6.0 million for the quarter ended December 31, 2023, compared to $6.5 million of pre-tax loss for the quarter ended December 31, 2022.
  • Loan originations decreased $88.3 million, or 16.1%, to $458.4 million during the quarter ended December 31, 2023, compared to $546.6 million during the quarter ended December 31, 2022. Origination volume relative to purchase activity accounted for 95.7% of originations for the quarter ended December 31, 2023, compared to 95.6% of total originations for the quarter ended December 31, 2022.
  • Mortgage banking non-interest income decreased $2.0 million, or 11.3%, to $16.0 million for the quarter ended December 31, 2023, compared to $18.1 million for the quarter ended December 31, 2022.
  • Gross margin on loans sold totaled 3.51% for the quarter ended December 31, 2023, compared to 3.41% for the quarter ended December 31, 2022. 
  • Total compensation, payroll taxes and other employee benefits decreased $2.5 million, or 14.5%, to $14.9 million during the quarter ended December 31, 2023, compared to $17.4 million during the quarter ended December 31, 2022. The decrease primarily related to decreased commission expense and salary expense driven by decreased loan origination volume and reduced employee headcount.

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. 

Contact: Mark R. Gerke
Chief Financial Officer
414-459-4012
markgerke@wsbonline.com 

 


WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

  For The Three Months Ended December 31,  For The Twelve Months Ended December 31, 
  2023  2022  2023  2022 
  (In Thousands, except per share amounts) 
Interest income:                
Loans $24,288  $18,654  $90,148  $62,935 
Mortgage-related securities  1,081   915   4,053   3,241 
Debt securities, federal funds sold and short-term investments  1,325   1,105   5,007   4,069 
Total interest income  26,694   20,674   99,208   70,245 
Interest expense:                
Deposits  8,253   2,352   25,738   4,863 
Borrowings  6,685   2,711   23,255   8,428 
Total interest expense  14,938   5,063   48,993   13,291 
Net interest income  11,756   15,611   50,215   56,954 
Provision (credit) for credit losses  (435)  664   656   968 
Net interest income after provision (credit) for loan losses  12,191   14,947   49,559   55,986 
Noninterest income:                
Service charges on loans and deposits  328   497   1,819   2,202 
Increase in cash surrender value of life insurance  337   344   1,710   1,738 
Mortgage banking income  15,830   15,811   75,686   99,560 
Other  381   443   1,970   2,055 
Total noninterest income  16,876   17,095   81,185   105,555 
Noninterest expenses:                
Compensation, payroll taxes, and other employee benefits  20,061   22,063   84,096   99,565 
Occupancy, office furniture, and equipment  2,021   2,166   8,323   8,706 
Advertising  1,030   972   3,779   3,976 
Data processing  1,212   1,040   4,653   4,470 
Communications  269   289   988   1,189 
Professional fees  907   612   2,686   1,815 
Real estate owned  1   13   4   19 
Loan processing expense  756   1,059   3,428   4,744 
Other  3,405   3,170   11,755   12,578 
Total noninterest expenses  29,662   31,384   119,712   137,062 
(Loss) income before income taxes  (595)  658   11,032   24,479 
Income tax (benefit) expense  (555)  (277)  1,657   4,992 
Net (loss) income $(40) $935  $9,375  $19,487 
(Loss) income per share:                
Basic $(0.00) $0.04  $0.47  $0.89 
Diluted $(0.00) $0.04  $0.46  $0.89 
Weighted average shares outstanding:                
Basic  19,380   20,966   20,158   21,884 
Diluted  19,398   21,069   20,196   22,010 
                 

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

  December 31,  December 31, 
  2023  2022 
  (Unaudited)     
Assets (In Thousands, except per share amounts) 
Cash $30,667  $33,700 
Federal funds sold  5,493   10,683 
Interest-earning deposits in other financial institutions and other short-term investments  261   2,259 
Cash and cash equivalents  36,421   46,642 
Securities available for sale (at fair value)  204,907   196,588 
Loans held for sale (at fair value)  164,993   131,188 
Loans receivable  1,664,215   1,510,178 
Less: Allowance for credit losses ("ACL") - loans  18,549   17,757 
Loans receivable, net  1,645,666   1,492,421 
         
Office properties and equipment, net  19,995   21,105 
Federal Home Loan Bank stock (at cost)  20,880   17,357 
Cash surrender value of life insurance  67,859   66,443 
Real estate owned, net  254   145 
Prepaid expenses and other assets  52,414   59,783 
Total assets $2,213,389  $2,031,672 
         
Liabilities and Shareholders' Equity        
Liabilities:        
Demand deposits $187,107  $230,596 
Money market and savings deposits  273,233   326,145 
Time deposits  730,284   642,271 
Total deposits  1,190,624   1,199,012 
         
Borrowings  611,054   386,784 
Advance payments by borrowers for taxes  6,607   5,334 
Other liabilities  61,048   70,056 
Total liabilities  1,869,333   1,661,186 
         
Shareholders' equity:        
Preferred stock  -   - 
Common stock  203   222 
Additional paid-in capital  103,908   128,550 
Retained earnings  269,606   274,246 
Unearned ESOP shares  (11,869)  (13,056)
Accumulated other comprehensive loss, net of taxes  (17,792)  (19,476)
Total shareholders' equity  344,056   370,486 
Total liabilities and shareholders' equity $2,213,389  $2,031,672 
         
Share Information        
Shares outstanding  20,315   22,174 
Book value per share $16.94  $16.71 
         

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)

  At or For the Three Months Ended 
  December 31,  September 30,  June 30,  March 31,  December 31, 
  2023  2023  2023  2023  2022 
  (Dollars in Thousands, except per share amounts) 
Condensed Results of Operations:                    
Net interest income $11,756  $11,989  $12,675  $13,795  $15,611 
Provision (credit) for credit losses  (435)  445   186   460   664 
Total noninterest income  16,876   22,230   23,525   18,554   17,095 
Total noninterest expense  29,662   30,021   30,922   29,107   31,384 
Income before income taxes  (595)  3,753   5,092   2,782   658 
Income tax (benefit) expense  (555)  500   1,085   627   (277)
Net (loss) income $(40) $3,253  $4,007  $2,155  $935 
(Loss) income per share – basic $(0.00) $0.16  $0.20  $0.10  $0.04 
(Loss) income per share – diluted $(0.00) $0.16  $0.20  $0.10  $0.04 
Dividends declared per common share $0.15  $0.15  $0.20  $0.20  $0.20 
                     
Performance Ratios (annualized):                    
Return on average assets - QTD  (0.01)%  0.58%  0.74%  0.43%  0.19%
Return on average equity - QTD  (0.05)%  3.63%  4.41%  2.35%  0.99%
Net interest margin - QTD  2.25%  2.26%  2.47%  2.88%  3.29%
                     
Return on average assets - YTD  0.44%  0.59%  0.59%  0.43%  0.96%
Return on average equity - YTD  2.62%  3.46%  3.37%  2.35%  4.91%
Net interest margin - YTD  2.46%  2.53%  2.67%  2.88%  3.00%
                     
Asset Quality Ratios:                    
Past due loans to total loans  0.68%  0.53%  0.50%  0.64%  0.41%
Nonaccrual loans to total loans  0.29%  0.25%  0.26%  0.29%  0.29%
Nonperforming assets to total assets  0.23%  0.20%  0.19%  0.22%  0.22%
Allowance for credit losses - loans to loans receivable  1.11%  1.12%  1.14%  1.14%  1.18%
                     

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF QUARTERLY AVERAGE BALANCES AND YIELD/COSTS
(Unaudited)

  At or For the Three Months Ended 
  December 31,  September 30,  June 30,  March 31,  December 31, 
  2023  2023  2023  2023  2022 
Average balances (Dollars in Thousands) 
Interest-earning assets                    
Loans receivable and held for sale $1,797,988  $1,797,233  $1,759,001  $1,654,942  $1,578,790 
Mortgage related securities  172,863   174,202   171,938   170,218   170,209 
Debt securities, federal funds sold and short-term investments  106,504   132,935   123,195   115,962   130,973 
Total interest-earning assets  2,077,355   2,104,370   2,054,134   1,941,122   1,879,972 
Noninterest-earning assets  105,073   105,714   108,320   107,009   122,643 
Total assets $2,182,428  $2,210,084  $2,162,454  $2,048,131  $2,002,615 
                     
Interest-bearing liabilities                    
Demand accounts $91,868  $90,623  $69,147  $68,564  $75,449 
Money market, savings, and escrow accounts  302,121   306,806   305,576   322,220   349,820 
Certificates of deposit  735,418   719,708   695,310   648,531   628,375 
Total interest-bearing deposits  1,129,407   1,117,137   1,070,033   1,039,315   1,053,644 
Borrowings  549,210   584,764   551,545   441,716   333,249 
Total interest-bearing liabilities  1,678,617   1,701,901   1,621,578   1,481,031   1,386,893 
Noninterest-bearing demand deposits  102,261   106,042   130,291   143,296   177,217 
Noninterest-bearing liabilities  56,859   46,805   46,446   51,840   63,866 
Total liabilities  1,837,737   1,854,748   1,798,315   1,676,167   1,627,976 
Equity  344,691   355,336   364,139   371,964   374,639 
Total liabilities and equity $2,182,428  $2,210,084  $2,162,454  $2,048,131  $2,002,615 
                     
Average Yield/Costs (annualized)                    
Loans receivable and held for sale  5.36%  5.26%  5.05%  4.87%  4.69%
Mortgage related securities  2.48%  2.41%  2.26%  2.25%  2.13%
Debt securities, federal funds sold and short-term investments  4.94%  4.45%  3.67%  3.71%  3.35%
Total interest-earning assets  5.10%  4.97%  4.73%  4.57%  4.36%
                     
Demand accounts  0.11%  0.11%  0.09%  0.08%  0.08%
Money market and savings accounts  1.64%  1.54%  1.42%  1.26%  0.67%
Certificates of deposit  3.76%  3.43%  2.80%  1.92%  1.10%
Total interest-bearing deposits  2.90%  2.64%  2.23%  1.60%  0.89%
Borrowings  4.83%  4.71%  4.08%  3.68%  3.23%
Total interest-bearing liabilities  3.53%  3.35%  2.86%  2.22%  1.45%
                     

COMMUNITY BANKING SEGMENT
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)

  At or For the Three Months Ended 
  December 31,  September 30,  June 30,  March 31,  December 31, 
  2023  2023  2023  2023  2022 
  (Dollars in Thousands) 
Condensed Results of Operations:                    
Net interest income $12,056  $12,431  $13,238  $14,008  $15,737 
Provision (credit) for credit losses  (550)  445   158   388   624 
Total noninterest income  894   966   1,540   987   1,033 
Noninterest expenses:                    
Compensation, payroll taxes, and other employee benefits  5,397   4,618   4,683   5,168   4,781 
Occupancy, office furniture and equipment  916   852   873   1,031   877 
Advertising  363   200   230   184   203 
Data processing  626   672   602   601   551 
Communications  75   70   72   78   92 
Professional fees  186   176   146   218   153 
Real estate owned  1   1   1   1   13 
Loan processing expense  -   -   -   -   - 
Other  628   703   1,641   896   2,468 
Total noninterest expense  8,192   7,292   8,248   8,177   9,138 
Income before income taxes  5,308   5,660   6,372   6,430   7,008 
Income tax expense  1,234   1,121   1,182   1,600   1,308 
Net income $4,074  $4,539  $5,190  $4,830  $5,700 
                     
Efficiency ratio - QTD (non-GAAP)  63.26%  54.43%  55.81%  54.53%  54.49%
Efficiency ratio - YTD (non-GAAP)  56.86%  54.94%  55.17%  54.53%  52.10%
                     

MORTGAGE BANKING SEGMENT
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)

  At or For the Three Months Ended 
  December 31,  September 30,  June 30,  March 31,  December 31, 
  2023  2023  2023  2023  2022 
  (Dollars in Thousands) 
Condensed Results of Operations:                    
Net interest loss $(367) $(550) $(622) $(282) $(241)
Provision for credit losses  115   -   28   72   40 
Total noninterest income  16,028   21,452   23,041   17,951   18,066 
Noninterest expenses:                    
Compensation, payroll taxes, and other employee benefits  14,881   17,186   17,929   15,099   17,397 
Occupancy, office furniture and equipment  1,105   1,141   1,173   1,232   1,289 
Advertising  667   716   714   705   769 
Data processing  583   551   480   516   490 
Communications  194   173   153   173   197 
Professional fees  704   564   466   188   453 
Real estate owned  -   -   -   -   - 
Loan processing expense  756   722   932   1,018   1,059 
Other  2,701   1,935   1,914   2,403   2,584 
Total noninterest expense  21,591   22,988   23,761   21,334   24,238 
Loss before income taxes  (6,045)  (2,086)  (1,370)  (3,737)  (6,453)
Income tax benefit  (1,827)  (657)  (126)  (1,002)  (1,602)
Net loss $(4,218) $(1,429) $(1,244) $(2,735) $(4,851)
                     
Efficiency ratio - QTD (non-GAAP)  137.86%  109.98%  105.99%  120.74%  135.98%
Efficiency ratio - YTD (non-GAAP)  116.99%  111.63%  112.49%  120.74%  104.02%
                     
Loan originations $458,363  $597,562  $623,342  $442,710  $546,628 
Purchase  95.7%  95.4%  96.4%  96.5%  95.6%
Refinance  4.3%  4.6%  3.6%  3.5%  4.4%
Gross margin on loans sold(1)  3.51%  3.62%  3.73%  3.78%  3.41%

(1) Gross margin on loans sold equals mortgage banking income (excluding the change in interest rate lock value) divided by total loan originations