Waterstone Financial, Inc. Announces Results Of Operations For The Quarter And Nine Months Ended September 30, 2017
WAUWATOSA, Wis., Oct. 24, 2017 /PRNewswire/ -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income per diluted share of $0.26 for the quarter ended September 30, 2017, which represents a 3.7% decrease compared to net income per diluted share of $0.27 for the quarter ended September 30, 2016. The quarter ended September 30, 2016 included a $0.02 impact on diluted earnings per share for a charge to income tax expense related to the write-off of a deferred tax asset. Net income per diluted share was $0.82 for the nine months ended September 30, 2017, a 17.1% increase compared to net income per diluted share of $0.70 for the nine months ended September 30, 2016.
"We continue to execute at a high level of profitability, despite a number of challenges faced by the mortgage banking industry," said Douglas Gordon, CEO of Waterstone Financial, Inc. "The third quarter performance reflects continued improvement from the community banking segment. Driven by loan growth and a continued focus on expense management, the community banking segment achieved a record $7.5 million of pretax income for the quarter. The mortgage banking segment third quarter pretax income decreased $2.5 million to $4.3 million from last year's total. The decline from last year's record profitability is driven by a number of industry-wide challenges, including: a decrease in demand for refinance products, housing inventory shortages and weather-related disruptions."
Highlights of the Quarter Ended September 30, 2017
Waterstone Financial, Inc. (Consolidated)
- Consolidated net income of Waterstone Financial, Inc. totaled $7.4 million for the quarter ended September 30, 2017, compared to $7.5 million for the quarter ended September 30, 2016.
- Consolidated net income of Waterstone Financial, Inc. totaled $22.8 million for the nine months ended September 30, 2017, compared to $19.1 million for the nine months ended September 30, 2016.
- Consolidated return on average assets totaled 1.56% for the quarter ended September 30, 2017 compared to 1.66% for the quarter ended September 30, 2016.
- Consolidated return on average assets totaled 1.70% for the nine months ended September 30, 2017 compared to 1.45% for the nine months ended September 30, 2016.
- Repurchased 72,700 shares through our buyback program at an average cost of $17.51 per share and declared a dividend of $0.12 per share during the quarter ended September 30, 2017.
Community Banking Segment
- Pre-tax income of the segment totaled $7.5 million for the quarter ended September 30, 2017, which represents a 19.5% increase compared to $6.2 million for the quarter ended September 30, 2016.
- Net interest income totaled $13.1 million for the quarter ended September 30, 2017, which represents a 16.7% increase compared to $11.2 million for the quarter ended September 30, 2016. The increase in net interest income, which was driven by loan growth and a decrease in borrowing costs, drove our net interest margin to 2.95% for the quarter ended September 30, 2017 compared to 2.70% for the quarter ended September 30, 2016.
- Average loans held for investment totaled $1.25 billion during the quarter ended September 30, 2017, which represents an increase of $120.3 million, or 10.7% over the comparable quarter in the prior year. Total loans increased $83.3 million, or 7.1%, to $1.26 billion at September 30, 2017 compared to $1.18 billion at December 31, 2016.
- Driven by margin expansion and continued cost control efforts, the efficiency ratio for the segment improved to 47.78% for the quarter ended September 30, 2017, compared to 50.85% for the quarter ended September 30, 2016.
- Nonperforming assets as percentage of total assets decreased to 0.62% as of September 30, 2017, compared to 0.71% at June 30, 2017 and 1.01% at September 30, 2016.
Mortgage Banking Segment
- Pre-tax income of the segment totaled $4.3 million for the quarter ended September 30, 2017, which represents a 36.3% decrease compared to $6.8 million for the quarter ended September 30, 2016.
- Loans originated for the purpose of sale in the secondary market decreased $48.0 million, or 6.8%, to $662.1 million during the quarter ended September 30, 2017, compared to $710.1 million for the quarter ended September 30, 2016. The decrease in originations was driven by a 46.5% decrease in the origination of loans made for the purpose of mortgage refinance. Driven by an expansion of our branch network, origination volumes of loans made for the purpose of residential purchases increased 3.1% compared to the comparative quarter in the prior year. Our origination efforts continue to be focused on loans made for the purpose of residential purchases, as opposed to mortgage refinance. Origination volume relative to purchase activity accounted for 89.6% of originations for the quarter ended September 30, 2017 compared to 81.7% of total originations for the quarter ended September 30, 2016.
- Gross margins on loans sold decreased approximately 1.5% during the quarter ended September 30, 2017, compared to the quarter ended September 30, 2016.
About Waterstone Financial, Inc.
Waterstone Financial, Inc. (NASDAQ: WSBF) 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 offers mortgage banking offices in 25 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 | For The Nine Months | ||||
2017 | 2016 | 2017 | 2016 | ||
(In Thousands, except per share amounts) | |||||
Interest income: | |||||
Loans | $ | 15,855 | 14,754 | 45,078 | 42,611 |
Mortgage-related securities | 647 | 743 | 2,021 | 2,371 | |
Debt securities, federal funds sold and short-term investments | 951 | 833 | 2,680 | 2,692 | |
Total interest income | 17,453 | 16,330 | 49,779 | 47,674 | |
Interest expense: | |||||
Deposits | 1,981 | 1,923 | 5,614 | 5,477 | |
Borrowings | 2,439 | 3,082 | 6,756 | 10,724 | |
Total interest expense | 4,420 | 5,005 | 12,370 | 16,201 | |
Net interest income | 13,033 | 11,325 | 37,409 | 31,473 | |
Provision for loan losses | 20 | 135 | (1,166) | 340 | |
Net interest income after provision for loan losses | 13,013 | 11,190 | 38,575 | 31,133 | |
Noninterest income: | |||||
Service charges on loans and deposits | 300 | 789 | 1,148 | 1,742 | |
Increase in cash surrender value of life insurance | 688 | 734 | 1,476 | 1,446 | |
Loss on sale of available for sale securities | - | - | (107) | - | |
Mortgage banking income | 31,863 | 35,552 | 92,774 | 91,146 | |
Other | 203 | 337 | 941 | 874 | |
Total noninterest income | 33,054 | 37,412 | 96,232 | 95,208 | |
Noninterest expenses: | |||||
Compensation, payroll taxes, and other employee benefits | 26,153 | 27,573 | 73,732 | 70,968 | |
Occupancy, office furniture, and equipment | 2,533 | 2,319 | 7,587 | 7,074 | |
Advertising | 821 | 661 | 2,414 | 1,974 | |
Data processing | 623 | 616 | 1,854 | 1,897 | |
Communications | 394 | 374 | 1,170 | 1,088 | |
Professional fees | 629 | 474 | 1,953 | 1,486 | |
Real estate owned | (20) | 37 | 258 | 344 | |
FDIC insurance premiums | 129 | 140 | 366 | 500 | |
Other | 3,054 | 3,347 | 10,227 | 9,663 | |
Total noninterest expenses | 34,316 | 35,541 | 99,561 | 94,994 | |
Income before income taxes | 11,751 | 13,061 | 35,246 | 31,347 | |
Income tax expense | 4,362 | 5,556 | 12,397 | 12,214 | |
Net income | $ | 7,389 | 7,505 | 22,849 | 19,133 |
Income per share: | |||||
Basic | $ | 0.27 | 0.28 | 0.83 | 0.71 |
Diluted | $ | 0.26 | 0.27 | 0.82 | 0.70 |
Weighted average shares outstanding: | |||||
Basic | 27,532 | 27,043 | 27,449 | 26,976 | |
Diluted | 27,953 | 27,429 | 27,927 | 27,283 | |
WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES | ||
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | ||
September 30, | December 31, | |
2017 | 2016 | |
(Unaudited) | ||
Assets | (In Thousands, except per share amounts) | |
Cash | $ 39,308 | $ 7,878 |
Federal funds sold | 34,916 | 26,828 |
Interest-earning deposits in other financial institutions and other short term investments | 18,367 | 12,511 |
Cash and cash equivalents | 92,591 | 47,217 |
Securities available for sale (at fair value) | 200,840 | 226,795 |
Loans held for sale (at fair value) | 175,137 | 225,248 |
Loans receivable | 1,261,160 | 1,177,884 |
Less: Allowance for loan losses | 14,063 | 16,029 |
Loans receivable, net | 1,247,097 | 1,161,855 |
Office properties and equipment, net | 22,889 | 23,655 |
Federal Home Loan Bank stock (at cost) | 18,450 | 13,275 |
Cash surrender value of life insurance | 65,665 | 61,509 |
Real estate owned, net | 4,568 | 6,118 |
Prepaid expenses and other assets | 26,891 | 24,947 |
Total assets | $ 1,854,128 | $ 1,790,619 |
Liabilities and Shareholders' Equity | ||
Liabilities: | ||
Demand deposits | $ 123,133 | $ 120,371 |
Money market and savings deposits | 148,607 | 162,456 |
Time deposits | 685,033 | 666,584 |
Total deposits | 956,773 | 949,411 |
Borrowings | 435,503 | 387,155 |
Advance payments by borrowers for taxes | 25,107 | 4,716 |
Other liabilities | 24,815 | 38,647 |
Total liabilities | 1,442,198 | 1,379,929 |
Shareholders' equity: | ||
Common stock | 295 | 294 |
Additional paid-in capital | 325,753 | 322,934 |
Retained earnings | 183,578 | 184,565 |
Unearned ESOP shares | (19,288) | (20,178) |
Accumulated other comprehensive income (loss), net of taxes | 328 | (378) |
Cost of shares repurchased | (78,736) | (76,547) |
Total shareholders' equity | 411,930 | 410,690 |
Total liabilities and shareholders' equity | $ 1,854,128 | $ 1,790,619 |
Share Information | ||
Shares Outstanding | 29,483 | 29,430 |
Book Value per share | $ 13.97 | $ 13.95 |
Closing market price | $ 19.50 | $ 18.40 |
Price to book ratio | 139.58% | 131.85% |
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, | |
2017 | 2017 | 2017 | 2016 | 2016 | |
(Dollars in Thousands) | |||||
Condensed Results of Operations: | |||||
Net interest income | $13,033 | 12,481 | 11,895 | 11,971 | 11,325 |
Provision for loan losses | 20 | 25 | (1,211) | 40 | 135 |
Total noninterest income | 33,054 | 37,241 | 25,937 | 31,157 | 37,412 |
Total noninterest expense | 34,316 | 36,187 | 29,058 | 32,441 | 35,541 |
Income before income taxes | 11,751 | 13,510 | 9,985 | 10,647 | 13,061 |
Income tax expense | 4,362 | 4,622 | 3,413 | 4,248 | 5,556 |
Net income | $7,389 | 8,888 | 6,572 | 6,399 | 7,505 |
Income per share – basic | $0.27 | 0.32 | 0.24 | 0.23 | 0.28 |
Income per share – diluted | $0.26 | 0.32 | 0.24 | 0.23 | 0.27 |
Dividends declared per share | $0.12 | 0.62 | 0.12 | 0.12 | 0.08 |
Performance Ratios: | |||||
Return on average assets - QTD | 1.56% | 1.99% | 1.54% | 1.44% | 1.66% |
Return on average equity - QTD | 7.12% | 8.70% | 6.44% | 6.19% | 7.36% |
Net interest margin - QTD | 2.95% | 3.00% | 2.97% | 2.88% | 2.70% |
Community Banking Segment | |||||
Efficiency ratio - QTD | 47.78% | 48.76% | 55.69% | 51.00% | 50.85% |
Return on average assets - YTD | 1.70% | 1.77% | 1.54% | 1.45% | 1.45% |
Return on average equity - YTD | 7.42% | 7.56% | 6.44% | 6.33% | 6.38% |
Net interest margin - YTD | 2.97% | 2.98% | 2.97% | 2.64% | 2.56% |
Community Banking Segment | |||||
Efficiency ratio - YTD | 50.56% | 52.09% | 55.69% | 55.40% | 57.06% |
Asset Quality Ratios: | |||||
Past due loans to total loans | 0.71% | 0.74% | 0.71% | 0.70% | 0.76% |
Non accrual loans to total loans | 0.56% | 0.70% | 0.67% | 0.84% | 0.93% |
Non performing assets to total assets | 0.62% | 0.71% | 0.76% | 0.89% | 1.01% |
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SOURCE Waterstone Financial, Inc.
