WAUWATOSA, Wis., Jan. 27, 2022 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $12.6 million, or $0.53 per diluted share for the quarter ended December 31, 2021 compared to $27.8 million, or $1.17 per diluted share for the quarter ended December 31, 2020. Net income per diluted share was $2.96 for the year ended December 31, 2021 compared to net income per diluted share of $3.30 for the year ended December 31, 2020.
“We achieved another quarter of strong financial results due to the continued dedication and efforts of our employees,” said Douglas Gordon, Chief Executive Officer of Waterstone Financial, Inc. “We continue to execute and build a stronger financial position. Given the performance over the past two years, we were excited to announce a new 3.5 million share repurchase program and declare a $0.50 special dividend during the quarter as we continue to deliver for our valued shareholders.”
Highlights of the Quarter Ended December 31, 2021
Waterstone Financial, Inc. (Consolidated)
Consolidated net income of Waterstone Financial, Inc. totaled $12.6 million for the quarter ended December 31, 2021, compared to $27.8 million for the quarter ended December 31, 2020.
Consolidated return on average assets was 2.22% for the quarter ended December 31, 2021 compared to 4.96% for the quarter ended December 31, 2020.
Consolidated return on average equity was 11.14% for the quarter ended December 31, 2021 and 27.11% for the quarter ended December 31, 2020.
Dividends declared during the quarter ended December 31, 2021 totaled $0.70 per common share.
We authorized a new share repurchase program, under which we will seek to repurchase up to 3.5 million shares, representing approximately 14.1% of outstanding shares.
We repurchased approximately 264,000 shares at a cost of $5.5 million during the quarter ended December 31, 2021.
Community Banking Segment
Pre-tax income totaled $8.4 million for the quarter ended December 31, 2021, which represents a $338,000, or 3.9%, decrease compared to $8.7 million for the quarter ended December 31, 2020.
Net interest income totaled $13.2 million for the quarter ended December 31, 2021, which represents a $1.3 million, or 9.3%, decrease compared to $14.5 million for the quarter ended December 31, 2020.
Average loans held for investment totaled $1.21 billion during the quarter ended December 31, 2021, which represents a decrease of $191.8 million, or 13.7%, compared to $1.40 billion for the quarter ended December 31, 2020. Average loans held for investment decreased $44.4 million compared to $1.26 billion for the quarter ended September 30, 2021 as residential real estate loans continued to prepay at an accelerated rate.
Net interest margin decreased 26 basis points to 2.47% for the quarter ended December 31, 2021 compared to 2.73% for the quarter ended December 31, 2020, which was a result of lower rates and average balance on loans and a higher average interest earnings cash balance within the debt securities, federal funds sold and short term investments category. Net interest margin decreased 21 basis points compared to 2.68% for the quarter ended September 30, 2021, driven by a decrease in average loan balance and a higher average cash balance.
The segment had a negative provision for loan losses of $1.5M for the quarter ended December 31, 2021 compared to no provision for loan losses for the quarter ended December 31, 2020. Net recoveries totaled $458,000 for the quarter ended December 31, 2021, as one significant loan recovery payment was received during the quarter, compared to net charge-offs of $51,000 for the quarter ended December 31, 2020.
The efficiency ratio was 53.02% for the quarter ended December 31, 2021, compared to 46.15% for the quarter ended December 31, 2020.
Average deposits (excluding escrow accounts) totaled $1.25 billion during the quarter ended December 31, 2021, an increase of $65.5 million, or 5.6%, compared to $1.18 billion during the quarter ended December 31, 2020. Average deposits decreased $9.9 million, or 3.2% annualized compared to the $1.26 billion for the quarter ended September 30, 2021.
Nonperforming assets as percentage of total assets was 0.26% at December 31, 2021, 0.18% at September 30, 2021, and 0.27% at December 31, 2020.
Past due loans as percentage of total loans was 0.59% at December 31, 2021, 0.92% at September 30, 2021, and 0.57% at December 31, 2020.
PPP loans totaled $1.8 million as of December 31, 2021. The average balance for the quarter ended December 31, 2021 was $2.7 million. For the quarter ended December 31, 2021, PPP loan interest income recognized was approximately $7,000 and the amortization of fee income was approximately $101,000.
The Company held approximately $3.3 million in loans, representing 0.3% of the total loan portfolio as of December 31, 2021, which had been modified as either a deferment of principal or principal and interest since the beginning of the pandemic. Of the $3.3 million in loans, $405,000 qualify as modifications under the Coronavirus Aid, Relief and Economic Security (“CARES Act”). The remaining $2.9 million is composed of three loan relationships that are classified as troubled debt restructurings.
Mortgage Banking Segment
Pre-tax income totaled $7.3 million for the quarter ended December 31, 2021, compared to $28.3 million for the quarter ended December 31, 2020.
Loan originations decreased $289.2 million, or 22.6%, to $993.1 million during the quarter ended December 31, 2021, compared to $1.28 billion during the quarter ended December 31, 2020. Origination volume relative to purchase activity accounted for 73.8% of originations for the quarter ended December 31, 2021 compared to 59.2% of total originations for the quarter ended December 31, 2020.
Mortgage banking non-interest income decreased $27.8 million, or 40.6%, to $40.7 million for the quarter ended December 31, 2021, compared to $68.5 million for the quarter ended December 31, 2020. During the quarter ended December 31, 2020, the Company sold mortgage servicing rights related to $975.9 million in loans receivable and with a book value of $6.4 million for $7.0 million resulting in a gain on sale of $600,000. There was no comparable sale during the quarter ended December 31, 2021. As of December 31, 2021, the Company maintained servicing rights related to $160.8 million in loans previously sold to third parties.
Gross margin on loans sold decreased to 4.18% for the quarter ended December 31, 2021, compared to 5.40% for the quarter ended December 31, 2020.
Total compensation, payroll taxes and other employee benefits decreased $5.5 million, or 16.4%, to $27.9 million during the quarter ended December 31, 2021 compared to $33.3 million during the quarter ended December 31, 2020. The decrease primarily related to decreased commission expense and branch manager compensation driven by decreased loan origination volume and branch profitability as gross margins decreased.
Other noninterest expense decreased $665,000 to $1.4 million during the quarter ended December 31, 2021 compared to $2.1 million during the quarter ended December 31, 2020. The decrease related to a decrease in the amortization expense on mortgage servicing rights due to the bulk sale of mortgage servicing rights during 2021 and a reduced provision for loan sale losses as origination volumes decreased.
Recent Developments:
COVID-19 Pandemic and the CARES Act
The CARES Act, signed into law at the end of March 2020, allowed for a temporary delay in the adoption of accounting guidance under Accounting Standards Codification Topic 326, “Financial Instruments – Credit Losses (“CECL”) until the earlier of December 31, 2020 or the 60th day after the end of the COVID-19 national emergency. During the quarter ended June 30, 2020, pursuant to the CARES Act and guidance from the Securities and Exchange Commission (“SEC”) and Financial Accounting Standards Board (“FASB”), we elected to delay adoption of CECL. On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law. Among other provisions, this Act extended the temporary delay on the adoption of CECL until January 1, 2022. We have elected to continue to delay adoption of CECL. As a result, our financial statements for the quarter and year ended December 31, 2021 include an allowance for loan losses that was prepared under the existing incurred loss methodology.
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, including significant disruption to financial market and other economic activity caused by the outbreak of COVID-19; 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.
WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For The Three Months Ended December 31,
For The Year Ended December 31,
2021
2020
2021
2020
(In Thousands, except per share amounts)
Interest income:
Loans
$
15,152
$
18,229
$
64,366
$
72,633
Mortgage-related securities
506
528
1,954
2,488
Debt securities, federal funds sold and short-term investments
926
870
3,563
3,363
Total interest income
16,584
19,627
69,883
78,484
Interest expense:
Deposits
878
2,605
4,420
14,365
Borrowings
2,534
2,706
9,948
10,619
Total interest expense
3,412
5,311
14,368
24,984
Net interest income
13,172
14,316
55,515
53,500
Provision (credit) for loan losses
(1,470
)
30
(3,990
)
6,340
Net interest income after provision (credit) for loan losses
14,642
14,286
59,505
47,160
Noninterest income:
Service charges on loans and deposits
842
1,078
3,325
4,462
Increase in cash surrender value of life insurance
318
318
1,615
1,905
Mortgage banking income
40,448
66,953
191,035
233,245
Other
408
1,537
7,220
4,405
Total noninterest income
42,016
69,886
203,195
244,017
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits
32,837
38,351
135,115
139,046
Occupancy, office furniture, and equipment
2,266
2,479
9,612
10,223
Advertising
958
1,066
3,528
3,691
Data processing
1,079
918
3,950
3,941
Communications
321
335
1,309
1,329
Professional fees
471
471
1,275
8,118
Real estate owned
14
(63
)
3
(8
)
Loan processing expense
940
1,026
4,610
4,646
Other
2,088
2,580
11,192
12,075
Total noninterest expenses
40,974
47,163
170,594
183,061
Income before income taxes
15,684
37,009
92,106
108,116
Income tax expense
3,131
9,174
21,315
26,971
Net income
$
12,553
$
27,835
$
70,791
$
81,145
Income per share:
Basic
$
0.53
$
1.17
$
2.98
$
3.32
Diluted
$
0.53
$
1.17
$
2.96
$
3.30
Weighted average shares outstanding:
Basic
23,598
23,703
23,741
24,464
Diluted
23,802
23,877
23,931
24,607
WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31,
December 31,
2021
2020
(Unaudited)
Assets
(In Thousands, except per share amounts)
Cash
$
343,016
$
56,190
Federal funds sold
13,981
18,847
Interest-earning deposits in other financial institutions and other short term investments
19,725
19,730
Cash and cash equivalents
376,722
94,767
Securities available for sale (at fair value)
179,016
159,619
Loans held for sale (at fair value)
312,738
402,003
Loans receivable
1,205,785
1,375,137
Less: Allowance for loan losses
15,778
18,823
Loans receivable, net
1,190,007
1,356,314
Office properties and equipment, net
22,273
23,722
Federal Home Loan Bank stock (at cost)
24,438
26,720
Cash surrender value of life insurance
65,368
63,573
Real estate owned, net
148
322
Prepaid expenses and other assets
45,148
57,547
Total assets
$
2,215,858
$
2,184,587
Liabilities and Shareholders' Equity
Liabilities:
Demand deposits
$
214,409
$
188,225
Money market and savings deposits
392,314
295,317
Time deposits
626,663
701,328
Total deposits
1,233,386
1,184,870
Borrowings
477,127
508,074
Advance payments by borrowers for taxes
4,094
3,522
Other liabilities
68,478
75,003
Total liabilities
1,783,085
1,771,469
Shareholders' equity:
Preferred stock
-
-
Common stock
248
251
Additional paid-in capital
174,505
180,684
Retained earnings
273,398
245,287
Unearned ESOP shares
(14,243
)
(15,430
)
Accumulated other comprehensive (loss) income, net of taxes
(1,135
)
2,326
Total shareholders' equity
432,773
413,118
Total liabilities and shareholders' equity
$
2,215,858
$
2,184,587
Share Information
Shares outstanding
24,795
25,088
Book value per share
$
17.45
$
16.47
Closing market price
$
21.86
$
18.82
Price to book ratio
125.27
%
114.27
%
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,
2021
2021
2021
2021
2020
(Dollars in Thousands, except per share amounts)
Condensed Results of Operations:
Net interest income
$
13,172
$
14,114
$
14,277
$
13,952
$
14,316
Provision (credit) for loan losses
(1,470
)
(700
)
(750
)
(1,070
)
30
Total noninterest income
42,016
52,936
52,044
56,199
69,886
Total noninterest expense
40,974
43,323
43,297
43,000
47,163
Income before income taxes
15,684
24,427
23,774
28,221
37,009
Income tax expense
3,131
5,427
5,880
6,877
9,174
Net income
$
12,553
$
19,000
$
17,894
$
21,344
$
27,835
Income per share - basic
$
0.53
$
0.80
$
0.75
$
0.90
$
1.17
Income per share - diluted
$
0.53
$
0.79
$
0.74
$
0.89
$
1.17
Dividends declared per share
$
0.70
$
0.20
$
0.70
$
0.20
$
0.50
Performance Ratios (annualized):
Return on average assets - QTD
2.22
%
3.38
%
3.25
%
3.99
%
4.96
%
Return on average equity - QTD
11.14
%
17.25
%
16.49
%
20.49
%
27.11
%
Net interest margin - QTD
2.47
%
2.68
%
2.78
%
2.80
%
2.73
%
Return on average assets - YTD
3.20
%
3.54
%
3.62
%
3.99
%
3.77
%
Return on average equity - YTD
16.38
%
18.08
%
18.49
%
20.49
%
20.18
%
Net interest margin - YTD
2.68
%
2.75
%
2.79
%
2.80
%
2.67
%
Asset Quality Ratios:
Past due loans to total loans
0.59
%
0.92
%
0.53
%
0.52
%
0.57
%
Nonaccrual loans to total loans
0.46
%
0.32
%
0.34
%
0.31
%
0.40
%
Nonperforming assets to total assets
0.26
%
0.18
%
0.20
%
0.20
%
0.27
%
Allowance for loan losses to loans receivable
1.31
%
1.37
%
1.34
%
1.33
%
1.37
%
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,
2021
2021
2021
2021
2020
Average balances
(Dollars in Thousands)
Interest-earning assets
Loans receivable and held for sale
$
1,517,984
$
1,573,194
$
1,655,078
$
1,657,260
$
1,775,455
Mortgage related securities
119,709
108,743
100,056
90,457
91,199
Debt securities, federal funds sold and short term investments
475,574
409,559
308,105
273,929
217,356
Total interest-earning assets
2,113,267
2,091,496
2,063,239
2,021,646
2,084,010
Noninterest-earning assets
131,703
137,454
143,375
147,781
147,573
Total assets
$
2,244,970
$
2,228,950
$
2,206,614
$
2,169,427
$
2,231,583
Interest-bearing liabilities
Demand accounts
$
70,762
$
68,478
$
63,610
$
55,552
$
53,771
Money market, savings, and escrow accounts
398,210
391,599
350,270
314,418
304,467
Certificates of deposit
643,546
663,343
690,196
705,712
726,132
Total interest-bearing deposits
1,112,518
1,123,420
1,104,076
1,075,682
1,084,370
Borrowings
481,971
475,000
480,054
482,665
546,070
Total interest-bearing liabilities
1,594,489
1,598,420
1,584,130
1,558,347
1,630,440
Noninterest-bearing demand deposits
153,303
153,436
141,648
138,446
128,665
Noninterest-bearing liabilities
49,982
40,148
45,658
50,188
64,001
Total liabilities
1,797,774
1,792,004
1,771,436
1,746,981
1,823,106
Equity
447,196
436,946
435,178
422,446
408,477
Total liabilities and equity
$
2,244,970
$
2,228,950
$
2,206,614
$
2,169,427
$
2,231,583
Average Yield/Costs (annualized)
Loans receivable and held for sale
3.96
%
4.07
%
3.99
%
4.06
%
4.08
%
Mortgage related securities
1.68
%
1.72
%
1.95
%
2.20
%
2.30
%
Debt securities, federal funds sold and short term investments
0.77
%
0.88
%
1.12
%
1.30
%
1.59
%
Total interest-earning assets
3.11
%
3.32
%
3.47
%
3.60
%
3.75
%
Demand accounts
0.08
%
0.08
%
0.08
%
0.07
%
0.07
%
Money market and savings accounts
0.22
%
0.24
%
0.23
%
0.32
%
0.53
%
Certificates of deposit
0.40
%
0.42
%
0.50
%
0.72
%
1.20
%
Total interest-bearing deposits
0.31
%
0.33
%
0.39
%
0.57
%
0.96
%
Borrowings
2.09
%
2.04
%
2.06
%
2.10
%
1.97
%
Total interest-bearing liabilities
0.85
%
0.84
%
0.90
%
1.05
%
1.30
%
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,
2021
2021
2021
2021
2020
(Dollars in Thousands)
Condensed Results of Operations:
Net interest income
$
13,197
$
14,090
$
14,517
$
14,247
$
14,546
Provision (credit) for loan losses
(1,500
)
(750
)
(750
)
(1,100
)
-
Total noninterest income
1,459
1,726
1,630
1,243
1,655
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits
5,085
5,360
4,874
4,975
5,159
Occupancy, office furniture and equipment
960
909
887
1,025
934
Advertising
278
233
260
209
244
Data processing
531
531
466
511
511
Communications
100
122
86
119
110
Professional fees
151
130
198
194
5
Real estate owned
14
1
-
(12
)
(63
)
Loan processing expense
-
-
-
-
-
Other
651
422
461
440
577
Total noninterest expense
7,770
7,708
7,232
7,461
7,477
Income before income taxes
8,386
8,858
9,665
9,129
8,724
Income tax expense
1,690
2,092
2,128
1,786
1,926
Net income
$
6,696
$
6,766
$
7,537
$
7,343
$
6,798
Efficiency ratio - QTD
53.02
%
48.74
%
44.79
%
48.17
%
46.15
%
Efficiency ratio - YTD
48.58
%
47.21
%
46.44
%
48.17
%
48.71
%
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,
2021
2021
2021
2021
2020
(Dollars in Thousands)
Condensed Results of Operations:
Net interest income (loss)
$
(49
)
$
(2
)
$
(251
)
$
(350
)
$
(223
)
Provision for loan losses
30
50
-
30
30
Total noninterest income
40,692
51,290
50,556
55,035
68,500
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits
27,866
28,981
29,170
29,262
33,347
Occupancy, office furniture and equipment
1,306
1,579
1,406
1,540
1,545
Advertising
680
602
651
615
822
Data processing
542
450
443
454
402
Communications
221
209
240
212
225
Professional fees
306
421
361
(524
)
441
Real estate owned
-
-
-
-
-
Loan processing expense
940
1,135
1,200
1,335
1,026
Other
1,445
2,270
2,678
2,681
2,110
Total noninterest expense
33,306
35,647
36,149
35,575
39,918
Income before income taxes
7,307
15,591
14,156
19,080
28,329
Income tax expense
1,443
3,341
3,761
5,096
7,252
Net income
$
5,864
$
12,250
$
10,395
$
13,984
$
21,077
Efficiency ratio - QTD
81.95
%
69.50
%
71.86
%
65.05
%
58.46
%
Efficiency ratio - YTD
71.44
%
68.71
%
68.32
%
65.05
%
65.20
%
Loan originations
$
993,113
$
1,055,500
$
1,065,161
$
1,115,091
$
1,282,321
Purchase
73.8
%
73.8
%
75.4
%
56.1
%
59.2
%
Refinance
26.2
%
26.2
%
24.6
%
43.9
%
40.8
%
Gross margin on loans sold(1)
4.18
%
4.54
%
4.81
%
4.86
%
5.40
%
(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
