AP NEWS
Press release content from Globe Newswire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Waterstone Financial, Inc. Announces Results of Operations for the Quarter and Nine Months Ended September 30, 2019.

October 23, 2019

WAUWATOSA, Wis., Oct. 23, 2019 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $10.9 million, or $0.42 per diluted share for the quarter ended September 30, 2019 compared to $8.7 million, or $0.31 per diluted share for the quarter ended September 30, 2018. Net income per diluted share was $1.03 for the nine months ended September 30, 2019 compared to net income per diluted share of $0.90 for the nine months ended September 30, 2018.

“We are pleased with our strong results in the third quarter,” said Douglas Gordon, CEO of Waterstone Financial, Inc. “We generated a record $14.5 million in consolidated quarterly pre-tax income, which represents a 26.6% increase over the prior year’s comparable quarter. The results reflect a record pre-tax quarter from the Community Banking segment and a very strong Mortgage Banking segment performance. During the quarter, the Community Banking segment remained disciplined with respect to cost management, while continuing to focus on future growth and the customer experience through the opening of a new branch. The Mortgage Banking segment had a strong performance due to increased production volumes of refinance products and a continued focus on improved efficiencies at the branch and corporate levels.”

Highlights of the Quarter Ended September 30, 2019

Waterstone Financial, Inc. (Consolidated)

-- Consolidated net income of Waterstone Financial, Inc. totaled $10.9 million for the quarter ended September 30, 2019, compared to $8.7 million for the quarter ended September 30, 2018. -- Consolidated return on average assets was 2.17% for the quarter ended September 30, 2019 compared to 1.80% for the quarter ended September 30, 2018. -- Consolidated return on average equity was 11.15% for the quarter ended September 30, 2019 and 8.48% for the quarter ended September 30, 2018. -- The Company repurchased a total 495,000 shares on the open market during the quarter ended September 30, 2019 at an average price of $16.77 per share and a total of 1,341,900 shares repurchased at an average price of $16.68 per share during the nine months ended September 30, 2019. -- Dividends declared totaled $0.12 per share during the quarter ended September 30, 2019 amounting to a total of $0.86 in dividends declared per share during the nine months ended September 30, 2019.

Community Banking Segment

-- Pre-tax income totaled $8.7 million for the quarter ended September 30, 2019, which represents a 1.0% increase compared to $8.6 million for the quarter ended September 30, 2018. -- Net interest income totaled $13.9 million for the quarter ended September 30, 2019, which represents a 1.7% decrease compared to $14.1 million for the quarter ended September 30, 2018. -- Average loans held for investment totaled $1.38 billion during the quarter ended September 30, 2019, which represents an increase of $36.7 million, or 2.7%, compared to the quarter ended September 30, 2018. Average loans held for investment increased $3.3 million, or 1.0% annualized, compared to $1.38 billion for the quarter ended June 30, 2019. -- Net interest margin decreased 27 basis points to 2.80% for the quarter ended September 30, 2019 compared to 3.07% for the quarter September 30, 2018, which was a result of the increase in cost of funding as certificates of deposit and borrowings repriced at higher rates over the past year. Net interest margin decreased two basis points compared to 2.82% for the quarter ended June 30, 2019. -- The segment had $150,000 negative provision for loan losses for the quarter ended September 30, 2019 compared to no provision for loan losses for loan losses for the quarter ended September 30, 2018. Net recoveries totaled $9,000 for the quarter ended September 30, 2019, compared to net recoveries of $63,000 for the quarter ended September 30, 2018. -- Noninterest income increased $103,000 for the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018 as loan prepayment fees and earnings on life insurance policies increased. -- Noninterest expenses decreased $73,000 for the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018. Compensation expenses decreased $360,000 as health insurance expense decreased. Other noninterest expenses decreased $118,000 as FDIC insurance premiums decreased. Offsetting the decreases, occupancy increased with the branch additions and real estate owned expenses increased due to lower gains on sale. -- The efficiency ratio was 43.97% for the quarter ended September 30, 2019, compared to 44.06% for the quarter ended September 30, 2018. -- Average deposits totaled $1.05 billion during the quarter ended September 30, 2019, an increase of $41.0 million, or 4.1%, compared to $1.01 billion during the quarter ended September 30, 2018. Average deposits increased $4.2 million, or 1.6% annualized, compared to the quarter ended June 30, 2019. -- Nonperforming assets as percentage of total assets was 0.41% at September 30, 2019, 0.37% at June 30, 2019, and 0.45% at September 30, 2018. -- Past due loans as percentage of total loans was 0.62% at September 30, 2019, 0.61% at June 30, 2019, and 0.67% at September 30, 2018.

Mortgage Banking Segment

-- Pre-tax income totaled $5.7 million for the quarter ended September 30, 2019, compared to $2.8 million of pre-tax income for the quarter ended September 30, 2018. -- Loan originations increased approximately $90.1 million, or 11.8%, to $851.3 million during the quarter ended September 30, 2019, compared to $761.2 million during the quarter ended September 30, 2018. Origination volume relative to purchase activity accounted for 79.0% of originations for the quarter ended September 30, 2019 compared to 92.1% of total originations for the quarter ended September 30, 2018. -- Mortgage banking income increased $3.4 million, or 10.2%, to $36.5 million for the quarter ended September 30, 2019, compared to $33.2 million for the quarter ended September 30, 2018. -- Gross margin on loans sold decreased to 4.30% for the quarter ended September 30, 2019, compared to 4.39% for the quarter ended September 30, 2018.

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, Oak Creek/27th St, Oconomowoc/Lake Country, Pewaukee, Waukesha/Brookfield, West Allis/Greenfield Ave, and West Allis/National Ave, Wisconsin along with a commercial lending office in Minneapolis, Minnesota. 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 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 For The Nine Months Months Ended September Ended September 30, 30, 2019 2018 2019 2018 ------ - ------ - ------- - ------- - (In Thousands, except per share amounts) Interest income: Loans $ 18,558 17,340 53,688 49,498 Mortgage-related securities 737 643 2,260 1,925 Debt securities, federal funds sold and short-term investments 1,083 1,063 3,515 2,949 ------ - ------ - ------- - ------- - Total interest income 20,378 19,046 59,463 54,372 Interest expense: Deposits 4,479 3,063 12,813 8,087 Borrowings 2,745 2,133 7,579 5,574 ------ - ------ - ------- - ------- - Total interest expense 7,224 5,196 20,392 13,661 ------ - ------ - ------- - ------- - Net interest income 13,154 13,850 39,071 40,711 Provision for loan losses (80 ) 40 (730 ) (1,060 ) ------ - ------ - ------- - ------- - Net interest income after provision for loan losses 13,234 13,810 39,801 41,771 Noninterest income: Service charges on loans and deposits 503 442 1,272 1,332 Increase in cash surrender value of life insurance 728 695 1,579 1,496 Mortgage banking income 36,062 32,653 93,526 88,930 Other 201 272 564 805 ------ - ------ - ------- - ------- - Total noninterest income 37,494 34,062 96,941 92,563 ------ - ------ - ------- - ------- - Noninterest expenses: Compensation, payroll taxes, and other employee benefits 27,514 27,453 75,227 74,670 Occupancy, office furniture, and equipment 2,629 2,751 8,085 7,995 Advertising 913 1,224 2,834 3,084 Data processing 1,003 809 2,641 2,057 Communications 358 412 1,039 1,229 Professional fees 954 583 2,438 1,930 Real estate owned 24 (128 ) 75 63 Loan processing expense 858 837 2,542 2,729 Other 1,979 2,485 6,055 7,553 ------ - ------ - ------- - ------- - Total noninterest expenses 36,232 36,426 100,936 101,310 ------ - ------ - ------- - ------- - Income before income taxes 14,496 11,446 35,806 33,024 Income tax expense 3,572 2,743 8,697 7,948 Net income $ 10,924 8,703 27,109 25,076 ------ - ------ - ------- - ------- - Income per share: Basic $ 0.42 0.32 1.04 0.91 Diluted $ 0.42 0.31 1.03 0.90 Weighted average shares outstanding: Basic 25,772 27,451 26,168 27,488 Diluted 25,962 27,680 26,372 27,765

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION September 30, December 31, 2019 2018 - --------- - - --------- - (Unaudited) Assets (In Thousands, except per share amounts) Cash $ 45,366 $ 48,234 Federal funds sold 11,268 25,100 Interest-earning deposits in other financial institutions and other short term 9,556 12,767 investments - --------- - - --------- - Cash and cash equivalents 66,190 86,101 Securities available for sale (at fair value) 178,056 185,720 Loans held for sale (at fair value) 237,772 141,616 Loans receivable 1,385,333 1,379,148 Less: Allowance for loan losses 12,547 13,249 - --------- - - --------- - Loans receivable, net 1,372,786 1,365,899 Office properties and equipment, net 24,889 24,524 Federal Home Loan Bank stock (at cost) 22,050 19,350 Cash surrender value of life insurance 69,309 67,550 Real estate owned, net 1,887 2,152 Prepaid expenses and other assets 32,490 22,469 - --------- - - --------- - Total assets $ 2,005,429 $ 1,915,381 - --------- - - --------- - Liabilities and Shareholders’ Equity Liabilities: Demand deposits $ 122,309 $ 139,111 Money market and savings deposits 184,183 163,511 Time deposits 733,077 735,873 - --------- - - --------- - Total deposits 1,039,569 1,038,495 Borrowings 515,795 435,046 Advance payments by borrowers for taxes 26,385 4,371 Other liabilities 36,437 37,790 - --------- - - --------- - Total liabilities 1,618,186 1,515,702 Shareholders’ equity: Preferred stock - - Common stock 271 285 Additional paid-in capital 211,557 232,406 Retained earnings 191,680 187,153 Unearned ESOP shares (16,914 ) (17,804 ) Accumulated other comprehensive income (loss), net of taxes 649 (2,361 ) Total shareholders’ equity 387,243 399,679 - --------- - - --------- - Total liabilities and shareholders’ equity $ 2,005,429 $ 1,915,381 - --------- - - --------- - Share Information Shares outstanding 27,147 28,463 Book value per share $ 14.26 $ 14.04 Closing market price $ 17.18 $ 16.76 Price to book ratio 120.48 % 119.37 %

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES SUMMARY OF KEY QUARTERLY FINANCIAL DATA (Unaudited) At or For the Three Months Ended September June 30, March December September 30, 31, 31, 30, 2019 2019 2019 2018 2018 ---------- -------- -------- -------- -------- (Dollars in Thousands, except per share amounts) Condensed Results of Operations: Net interest income $ 13,154 12,981 12,936 13,466 13,850 Provision for loan losses (80 ) 30 (680 ) - 40 Total noninterest income 37,494 35,190 24,257 25,636 34,062 Total noninterest expense 36,232 35,355 29,349 31,846 36,426 - ------ - ------ - ------ - ------ - ------ - Income before income taxes 14,496 12,786 8,524 7,256 11,446 Income tax expense 3,572 3,143 1,982 1,578 2,743 Net income $ 10,924 9,643 6,542 5,678 8,703 - ------ - ------ - ------ - ------ - ------ - Income per share – basic $ 0.42 0.37 0.25 0.21 0.32 Income per share – diluted $ 0.42 0.37 0.24 0.21 0.31 Dividends declared per share $ 0.12 0.12 0.62 0.12 0.12 Performance Ratios (annualized): Return on average assets - QTD 2.17 % 1.95 % 1.39 % 1.18 % 1.80 % Return on average equity - QTD 11.15 % 9.96 % 6.65 % 5.58 % 8.48 % Net interest margin - QTD 2.80 % 2.82 % 2.93 % 2.99 % 3.07 % Return on average assets - YTD 1.84 % 1.67 % 1.39 % 1.64 % 1.80 % Return on average equity - YTD 9.21 % 8.28 % 6.65 % 7.60 % 8.25 % Net interest margin - YTD 2.85 % 2.88 % 2.93 % 3.09 % 3.13 % Asset Quality Ratios: Past due loans to total loans 0.62 % 0.61 % 0.46 % 0.50 % 0.67 % Nonaccrual loans to total loans 0.46 % 0.41 % 0.49 % 0.48 % 0.48 % Nonperforming assets to total assets 0.41 % 0.37 % 0.44 % 0.45 % 0.45 %

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES SUMMARY OF QUARTERLY AVERAGE BALANCES AND YIELD/COSTS (Unaudited) At or For the Three Months Ended September June 30, March 31, December September 30, 31, 30, 2019 2019 2019 2018 2018 ----------- ----------- ----------- ----------- ----------- Average balances (Dollars in Thousands) Interest-earning assets Loans receivable and held for sale 1,579,575 1,552,199 1,477,991 1,496,125 1,507,632 Mortgage related securities 114,051 114,537 115,674 111,004 106,047 Debt securities, federal funds sold and short term 169,621 180,111 194,669 179,232 176,733 investments --------- - --------- - --------- - --------- - --------- - Total interest-earning assets 1,863,247 1,846,847 1,788,334 1,786,361 1,790,412 Noninterest-earning assets 137,723 136,263 125,396 119,715 122,575 --------- - --------- - --------- - --------- - --------- - Total assets 2,000,970 1,983,110 1,913,730 1,906,076 1,912,987 --------- - --------- - --------- - --------- - --------- - Interest-bearing liabilities Demand accounts 37,015 35,744 36,268 36,941 37,936 Money market and savings accounts 206,474 193,542 176,237 184,873 185,864 Certificates of deposit 739,544 736,798 735,471 722,774 707,970 --------- - --------- - --------- - --------- - --------- - Total interest-bearing deposits 983,033 966,084 947,976 944,588 931,770 Borrowings 509,099 504,940 438,905 439,601 444,570 --------- - --------- - --------- - --------- - --------- - Total interest-bearing liabilities 1,492,132 1,471,024 1,386,881 1,384,189 1,376,340 Noninterest-bearing demand deposits 86,849 91,545 97,951 97,677 100,804 Noninterest-bearing liabilities 33,130 32,143 30,027 20,219 28,632 --------- - --------- - --------- - --------- - --------- - Total liabilities 1,612,111 1,594,712 1,514,859 1,502,085 1,505,776 Equity 388,859 388,398 398,871 403,991 407,211 --------- - --------- - --------- - --------- - --------- - Total liabilities and equity 2,000,970 1,983,110 1,913,730 1,906,076 1,912,987 --------- - --------- - --------- - --------- - --------- - Average Yield/Costs (annualized) Loans receivable and held for sale 4.66 % 4.66 % 4.69 % 4.63 % 4.56 % Mortgage related securities 2.56 % 2.68 % 2.66 % 2.58 % 2.41 % Debt securities, federal funds sold and short term 2.53 % 2.50 % 2.73 % 2.52 % 2.39 % investments --------- - --------- - --------- - --------- - --------- - Total interest-earning assets 4.34 % 4.32 % 4.35 % 4.29 % 4.22 % Demand accounts 0.09 % 0.09 % 0.09 % 0.09 % 0.10 % Money market and savings accounts 0.57 % 0.66 % 0.63 % 0.47 % 0.35 % Certificates of deposit 2.24 % 2.19 % 2.04 % 1.82 % 1.62 % --------- - --------- - --------- - --------- - --------- - Total interest-bearing deposits 1.81 % 1.80 % 1.71 % 1.49 % 1.30 % Borrowings 2.14 % 2.06 % 2.08 % 2.10 % 1.90 % --------- - --------- - --------- - --------- - --------- - Total interest-bearing liabilities 1.92 % 1.89 % 1.82 % 1.68 % 1.50 %

COMMUNITY BANKING SEGMENT SUMMARY OF KEY QUARTERLY FINANCIAL DATA (Unaudited) At or For the Three Months Ended SeptemberJune 30, March December September 30, 31, 31, 30, 2019 2019 2019 2018 2018 -------- -------- -------- -------- -------- (Dollars in Thousands) Condensed Results of Operations: Net interest income $ 13,885 13,530 13,132 13,774 14,121 Provision for loan losses (150 ) - (700 ) - - Total noninterest income 1,415 1,079 881 911 1,312 Noninterest expenses: Compensation, payroll taxes, and other employee benefits 4,075 4,671 4,756 4,761 4,435 Occupancy, office furniture and equipment 942 944 972 842 826 Advertising 202 220 181 185 183 Data processing 588 493 457 422 414 Communications 90 93 82 92 112 Professional fees 223 160 268 339 257 Real estate owned 24 19 32 (62 ) (128 ) Loan processing expense - - - - - Other 583 635 489 571 701 ------ - ------ - ------ - ------ - ------ - Total noninterest expense 6,727 7,235 7,237 7,150 6,800 ------ - ------ - ------ - ------ - ------ - Income before income taxes 8,723 7,374 7,476 7,535 8,633 Income tax expense 1,982 1,594 1,687 1,632 2,003 Net income $ 6,741 5,780 5,789 5,903 6,630 ------ - ------ - ------ - ------ - ------ - Efficiency ratio - QTD 43.97 % 49.52 % 51.64 % 48.69 % 44.06 % Efficiency ratio - YTD 48.27 % 50.56 % 51.64 % 47.63 % 47.28 %

MORTGAGE BANKING SEGMENT SUMMARY OF KEY QUARTERLY FINANCIAL DATA (Unaudited) At or For the Three Months Ended September June 30, March 31, December September 30, 31, 30, 2019 2019 2019 2018 2018 ----------- --------- --------- --------- --------- (Dollars in Thousands) Condensed Results of Operations: Net interest income $ (774 ) (529 ) (208 ) (332 ) (286 ) Provision for loan losses 70 30 20 - 40 Total noninterest income 36,535 34,364 23,571 24,986 33,165 Noninterest expenses: Compensation, payroll taxes, and other employee benefits 23,616 22,579 16,060 18,499 23,164 Occupancy, office furniture and equipment 1,687 1,736 1,804 2,018 1,925 Advertising 711 743 777 854 1,041 Data processing 411 372 308 309 386 Communications 268 260 246 290 300 Professional fees 688 620 426 52 319 Real estate owned - - - - - Loan processing expense 858 879 805 643 837 Other 1,725 1,186 1,912 2,297 2,064 - ------- - ------- - ------- - ------- - ------- - Total noninterest expense 29,964 28,375 22,338 24,962 30,036 - ------- - ------- - ------- - ------- - ------- - Income before income taxes 5,727 5,430 1,005 (308 ) 2,803 Income tax expense 1,584 1,545 286 (62 ) 737 Net income $ 4,143 3,885 719 (246 ) 2,066 - ------- - ------- - ------- - ------- - ------- - Efficiency ratio - QTD 83.79 % 83.86 % 95.61 % 101.25 % 91.35 % Efficiency ratio - YTD 86.79 % 88.66 % 95.61 % 92.89 % 90.60 % Loan Originations $ 851,297 793,254 501,432 600,156 761,206 Purchase 79.0 % 87.6 % 89.9 % 91.1 % 92.1 % Refinance 21.0 % 12.4 % 10.1 % 8.9 % 7.9 % Gross margin on loans sold(1) 4.30 % 4.29 % 4.57 % 4.17 % 4.39 % (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. GerkeChief Financial Officer414.459.4012markgerke@wsbonline.com