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

WAUWATOSA, Wis., Oct. 22, 2024 (GLOBE NEWSWIRE) -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $4.7 million, or $0.26 per diluted share, for the quarter ended September 30, 2024, compared to net income of $3.3 million, or $0.16 per diluted share for the quarter ended September 30, 2023. Net income per diluted share was $0.72 for the nine months ended September 30, 2024, compared to net income per diluted share of $0.46 for the nine months ended September 30, 2023.

“The Community Banking segment achieved growth in its loan and core deposit (excluding brokered deposits) balances,” said William Bruss, Chief Executive Officer of Waterstone Financial, Inc. “We continue to maintain strong asset quality metrics and remain in a net recovery position, resulting in a negative provision during the quarter. While the decrease in our wholesale borrowing rate during the quarter captures a portion of the benefit from the 50 bps cut in the Federal Funds rate during September, the competitive retail funding environment remains a headwind. The Mortgage Banking segment experienced a decrease in fundings; however, it remained profitable due in large part to our continued focus on cost control. Waterstone Financial, Inc. remained active in share repurchases and once again declared a dividend, as we are committed to shareholder returns.” 

Highlights of the Quarter Ended September 30, 2024

Waterstone Financial, Inc. (Consolidated)

 ●Consolidated net income of Waterstone Financial, Inc. totaled $4.7 million for the quarter ended September 30, 2024, compared to net income of $3.3 million for the quarter ended September 30, 2023.
Consolidated return on average assets was 0.83% for the quarter ended September 30, 2024, compared to 0.58% for the quarter ended September 30, 2023.
Consolidated return on average equity was 5.55% for the quarter ended September 30, 2024, and 3.63% for the quarter ended September 30, 2023.
Dividends declared during the quarter ended September 30, 2024, totaled $0.15 per common share.
During the quarter ended September 30, 2024, we repurchased approximately 71,000 shares at a cost (including the federal excise tax) of $979,000, or $13.75 per share.
Nonperforming assets as a percentage of total assets was 0.25% at September 30, 2024, 0.25% at June 30, 2024, and 0.20% at September 30, 2023.  
Past due loans as a percentage of total loans was 0.63% at September 30, 2024, 0.76% at June 30, 2024, and 0.53% at September 30, 2023. 
Book value per share was $17.58 at September 30, 2024 and $16.94 at December 31, 2023. 

Community Banking Segment

Pre-tax income totaled $5.6 million for the quarter ended September 30, 2024, which represents a $14,000, or 0.2%, decrease compared to $5.7 million for the quarter ended September 30, 2023.
Net interest income totaled $12.3 million for the quarter ended September 30, 2024, which represents a $181,000, or 1.5%, decrease compared to $12.4 million for the quarter ended September 30, 2023.
Average loans held for investment totaled $1.69 billion during the quarter ended September 30, 2024, which represents an increase of $60.9 million, or 3.7%, compared to $1.63 billion for the quarter ended September 30, 2023. The increase was primarily due to increases in the construction, commercial real estate, and over four family mortgages. Average loans held for investment increased $19.7 million compared to $1.67 billion for the quarter ended June 30, 2024. The increase was primarily due to increases in construction and over four family mortgages.
Net interest margin decreased 13 basis points to 2.13% for the quarter ended September 30, 2024, compared to 2.26% for the quarter ended September 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 increased 12 basis points compared to 2.01% for the quarter ended June 30, 2024, primarily driven by an increase in weighted average yield on loans receivable and held for sale.     
Past due loans at the community banking segment totaled $8.0 million at September 30, 2024, $9.3 million at June 30, 2024, and $6.7 million at September 30, 2023.
The segment had a negative provision for credit losses related to funded loans of $218,000 for the quarter ended September 30, 2024, compared to a provision for credit losses related to funded loans of $206,000 for the quarter ended September 30, 2023. The current quarter decrease was primarily due to a decrease in historical loss rates, net recoveries for the period, 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 $84,000 for the quarter ended September 30, 2024, compared to a provision for credit losses related to unfunded loan commitments of $239,000 for the quarter ended September 30, 2023. The negative provision for credit losses related to unfunded loan commitments for the quarter ended September 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 60.35% for the quarter ended September 30, 2024, compared to 54.43% for the quarter ended September 30, 2023.
Average deposits (excluding escrow accounts) totaled $1.25 billion during the quarter ended September 30, 2024, an increase of $47.9 million, or 4.0%, compared to $1.20 billion during the quarter ended September 30, 2023. Average deposits increased $27.6 million, or 9.1% annualized, compared to $1.22 billion for the quarter ended June 30, 2024.  The increases were primarily due to an increase in certificates of deposit balances.  The segment had $2.0 million in brokered certificate of deposits at September 30, 2024.

Mortgage Banking Segment

 ●Pre-tax income totaled $144,000 for the quarter ended September 30, 2024, compared to $2.1 million of pre-tax loss for the quarter ended September 30, 2023.
Loan originations decreased $38.8 million, or 6.5%, to $558.7 million during the quarter ended September 30, 2024, compared to $597.6 million during the quarter ended September 30, 2023. Origination volume relative to purchase activity accounted for 88.9% of originations for the quarter ended September 30, 2024, compared to 95.4% of total originations for the quarter ended September 30, 2023.
Mortgage banking non-interest income decreased $66,000, or 0.3%, to $21.4 million for the quarter ended September 30, 2024, compared to $21.5 million for the quarter ended September 30, 2023.
Gross margin on loans sold totaled 3.83% for the quarter ended September 30, 2024, compared to 3.62% for the quarter ended September 30, 2023.  
Total compensation, payroll taxes and other employee benefits decreased $1.3 million, or 7.3%, to $15.9 million during the quarter ended September 30, 2024, compared to $17.2 million during the quarter ended September 30, 2023. The decrease primarily related to decreased salary expense and incentives expense driven by reduced employee headcount and a decrease in new branches added over the past year.


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 September 30, For The Nine Months Ended September 30,
 2024  2023 2024  2023
 (In Thousands, except per share amounts)
Interest income:             
Loans$26,590  $23,825 $76,675  $65,860
Mortgage-related securities 1,137   1,060  3,360   2,972
Debt securities, federal funds sold and short-term investments 1,464   1,492  4,081   3,682
Total interest income 29,191   26,377  84,116   72,514
Interest expense:             
Deposits 10,477   7,442  29,163   17,485
Borrowings 7,197   6,946  21,620   16,570
Total interest expense 17,674   14,388  50,783   34,055
Net interest income 11,517   11,989  33,333   38,459
Provision (credit) for credit losses (377)  445  (535)  1,091
Net interest income after provision (credit) for loan losses 11,894   11,544  33,868   37,368
Noninterest income:             
Service charges on loans and deposits 545   450  1,434   1,491
Increase in cash surrender value of life insurance 410   334  1,562   1,373
Mortgage banking income 21,294   21,172  66,200   59,856
Other 303   274  1,101   1,589
Total noninterest income 22,552   22,230  70,297   64,309
Noninterest expenses:             
Compensation, payroll taxes, and other employee benefits 21,017   21,588  62,655   64,035
Occupancy, office furniture, and equipment 1,857   1,993  5,994   6,302
Advertising 926   916  2,827   2,749
Data processing 1,297   1,229  3,745   3,441
Communications 232   243  698   719
Professional fees 569   745  2,070   1,779
Real estate owned -   1  14   3
Loan processing expense 697   722  2,604   2,672
Other 1,965   2,584  5,762   8,350
Total noninterest expenses 28,560   30,021  86,369   90,050
Income before income taxes 5,886   3,753  17,796   11,627
Income tax expense 1,158   500  4,318   2,212
Net income$4,728  $3,253 $13,478  $9,415
Income per share:             
Basic$0.26  $0.16 $0.72  $0.46
Diluted$0.26  $0.16 $0.72  $0.46
Weighted average shares outstanding:             
Basic 18,350   19,998  18,631   20,420
Diluted 18,445   20,022  18,677   20,473


WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
  September 30,  December 31, 
 2024  2023 
 (Unaudited)     
Assets(In Thousands, except per share amounts) 
Cash$35,770  $30,667 
Federal funds sold 5,359   5,493 
Interest-earning deposits in other financial institutions and other short-term investments 278   261 
Cash and cash equivalents 41,407   36,421 
Securities available for sale (at fair value) 213,164   204,907 
Loans held for sale (at fair value) 155,846   164,993 
Loans receivable 1,695,403   1,664,215 
Less: Allowance for credit losses ("ACL") - loans 18,198   18,549 
Loans receivable, net 1,677,205   1,645,666 
        
Office properties and equipment, net 19,450   19,995 
Federal Home Loan Bank stock (at cost) 21,681   20,880 
Cash surrender value of life insurance 69,601   67,859 
Real estate owned, net 145   254 
Prepaid expenses and other assets 45,837   52,414 
Total assets$2,244,336  $2,213,389 
        
Liabilities and Shareholders' Equity       
Liabilities:       
Demand deposits$180,449  $187,107 
Money market and savings deposits 279,188   273,233 
Time deposits 804,204   730,284 
Total deposits 1,263,841   1,190,624 
        
Borrowings 560,127   611,054 
Advance payments by borrowers for taxes 27,847   6,607 
Other liabilities 50,519   61,048 
Total liabilities 1,902,334   1,869,333 
        
Shareholders' equity:       
Preferred stock -   - 
Common stock 194   203 
Additional paid-in capital 92,789   103,908 
Retained earnings 274,748   269,606 
Unearned ESOP shares (10,979)  (11,869)
Accumulated other comprehensive loss, net of taxes (14,750)  (17,792)
Total shareholders' equity 342,002   344,056 
Total liabilities and shareholders' equity$2,244,336  $2,213,389 
        
Share Information       
Shares outstanding 19,457   20,315 
Book value per share$17.58  $16.94 


 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, 
 2024  2024  2024  2023  2023 
 (Dollars in Thousands, except per share amounts) 
Condensed Results of Operations:                   
Net interest income$11,517  $10,679  $11,137  $11,756  $11,989 
Provision (credit) for credit losses (377)  (225)  67   (435)  445 
Total noninterest income 22,552   26,497   21,248   16,876   22,230 
Total noninterest expense 28,560   30,259   27,550   29,662   30,021 
Income (loss) before income taxes (benefit) 5,886   7,142   4,768   (595)  3,753 
Income tax expense (benefit) 1,158   1,430   1,730   (555)  500 
Net income (loss)$4,728  $5,712  $3,038  $(40) $3,253 
Income (loss) per share – basic$0.26  $0.31  $0.16  $(0.00) $0.16 
Income (loss) per share – diluted$0.26  $0.31  $0.16  $(0.00) $0.16 
Dividends declared per common share$0.15  $0.15  $0.15  $0.15  $0.15 
                    
Performance Ratios (annualized):                   
Return on average assets - QTD 0.83%  1.02%  0.56%  -0.01%  0.58%
Return on average equity - QTD 5.55%  6.84%  3.56%  -0.05%  3.63%
Net interest margin - QTD 2.13%  2.01%  2.15%  2.25%  2.26%
                    
Return on average assets - YTD 0.81%  0.79%  0.56%  0.44%  0.59%
Return on average equity - YTD 5.30%  5.17%  3.56%  2.62%  3.46%
Net interest margin - YTD 2.09%  2.08%  2.15%  2.46%  2.53%
                    
Asset Quality Ratios:                   
Past due loans to total loans 0.63%  0.76%  0.64%  0.68%  0.53%
Nonaccrual loans to total loans 0.32%  0.33%  0.29%  0.29%  0.25%
Nonperforming assets to total assets 0.25%  0.25%  0.23%  0.23%  0.20%
Allowance for credit losses - loans to loans receivable 1.07%  1.10%  1.11%  1.11%  1.12%


 WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES

SUMMARY OF QUARTERLY AVERAGE BALANCES AND YIELD/COSTS

(Unaudited)
  At or For the Three Months Ended 
 September 30,  June 30,  March 31,  December 31,  September 30, 
 2024  2024  2024  2023  2023 
Average balances(Dollars in Thousands) 
Interest-earning assets                   
Loans receivable and held for sale$1,870,627  $1,859,608  $1,805,102  $1,797,988  $1,797,233 
Mortgage related securities 170,221   171,895   172,077   172,863   174,202 
Debt securities, federal funds sold and short-term investments 115,270   107,992   110,431   106,504   132,935 
Total interest-earning assets 2,156,118   2,139,495   2,087,610   2,077,355   2,104,370 
Noninterest-earning assets 104,600   104,019   103,815   105,073   105,714 
Total assets$2,260,718  $2,243,514  $2,191,425  $2,182,428  $2,210,084 
                    
Interest-bearing liabilities                   
Demand accounts$89,334  $91,300  $87,393  $91,868  $90,623 
Money market, savings, and escrow accounts 304,116   293,483   281,171   302,121   306,806 
Certificates of deposit 786,228   758,252   739,543   735,418   719,708 
Total interest-bearing deposits 1,179,678   1,143,035   1,108,107   1,129,407   1,117,137 
Borrowings 600,570   622,771   602,724   549,210   584,764 
Total interest-bearing liabilities 1,780,248   1,765,806   1,710,831   1,678,617   1,701,901 
Noninterest-bearing demand deposits 91,532   93,637   92,129   102,261   106,042 
Noninterest-bearing liabilities 49,787   48,315   45,484   56,859   46,805 
Total liabilities 1,921,567   1,907,758   1,848,444   1,837,737   1,854,748 
Equity 339,151   335,756   342,981   344,691   355,336 
Total liabilities and equity$2,260,718  $2,243,514  $2,191,425  $2,182,428  $2,210,084 
                    
Average Yield/Costs (annualized)                   
Loans receivable and held for sale 5.65%  5.54%  5.46%  5.36%  5.26%
Mortgage related securities 2.66%  2.63%  2.57%  2.48%  2.41%
Debt securities, federal funds sold and short-term investments 5.05%  4.82%  4.82%  4.94%  4.45%
Total interest-earning assets 5.39%  5.27%  5.18%  5.10%  4.97%
                    
Demand accounts 0.11%  0.11%  0.11%  0.11%  0.11%
Money market and savings accounts 1.94%  1.89%  1.79%  1.64%  1.54%
Certificates of deposit 4.54%  4.41%  4.19%  3.76%  3.43%
Total interest-bearing deposits 3.53%  3.42%  3.26%  2.90%  2.64%
Borrowings 4.77%  4.92%  4.54%  4.83%  4.71%
Total interest-bearing liabilities 3.95%  3.95%  3.71%  3.53%  3.35%


COMMUNITY BANKING SEGMENT

SUMMARY OF KEY QUARTERLY FINANCIAL DATA

(Unaudited)
  At or For the Three Months Ended 
 September 30,  June 30,  March 31,  December 31,  September 30, 
 2024  2024  2024  2023  2023 
 (Dollars in Thousands) 
Condensed Results of Operations:                   
Net interest income$12,250  $11,234  $11,598  $12,056  $12,431 
Provision (credit) for credit losses (302)  (279)  105   (550)  445 
Total noninterest income 1,227   1,491   990   894   966 
Noninterest expenses:                   
Compensation, payroll taxes, and other employee benefits 5,326   5,116   5,360   5,397   4,618 
Occupancy, office furniture and equipment 904   983   1,000   916   852 
Advertising 311   229   174   363   200 
Data processing 720   687   693   626   672 
Communications 80   72   65   75   70 
Professional fees 190   177   208   186   176 
Real estate owned -   1   13   1   1 
Loan processing expense -   -   -   -   - 
Other 602   672   691   628   703 
Total noninterest expense 8,133   7,937   8,204   8,192   7,292 
Income before income taxes 5,646   5,067   4,279   5,308   5,660 
Income tax expense 941   718   1,639   1,234   1,121 
Net income$4,705  $4,349  $2,640  $4,074  $4,539 
                    
Efficiency ratio - QTD (non-GAAP) 60.35%  62.37%  65.17%  63.26%  54.43%
Efficiency ratio - YTD (non-GAAP) 62.58%  63.77%  65.17%  56.86%  54.94%


 MORTGAGE BANKING SEGMENT

SUMMARY OF KEY QUARTERLY FINANCIAL DATA

(Unaudited)
 At or For the Three Months Ended 
 September 30,  June 30,  March 31,  December 31,  September 30, 
 2024  2024  2024  2023  2023 
 (Dollars in Thousands) 
Condensed Results of Operations:                   
Net interest loss$(760) $(552) $(541) $(367) $(550)
Provision (credit) for credit losses (75)  54   (38)  115   - 
Total noninterest income 21,386   25,081   20,328   16,028   21,452 
Noninterest expenses:                   
Compensation, payroll taxes, and other employee benefits 15,930   16,886   14,756   14,881   17,186 
Occupancy, office furniture and equipment 953   1,046   1,108   1,105   1,141 
Advertising 615   758   740   667   716 
Data processing 570   549   508   583   551 
Communications 152   168   161   194   173 
Professional fees 379   569   520   704   564 
Real estate owned -   -   -   -   - 
Loan processing expense 697   861   1,046   756   722 
Other 1,261   1,641   617   2,701   1,935 
Total noninterest expense 20,557   22,478   19,456   21,591   22,988 
Income (loss) before income taxes (benefit) 144   1,997   369   (6,045)  (2,086)
Income tax expense (benefit) 194   684   71   (1,827)  (657)
Net (loss) income$(50) $1,313  $298  $(4,218) $(1,429)
                    
Efficiency ratio - QTD (non-GAAP) 99.67%  91.64%  98.33%  137.86%  109.98%
Efficiency ratio - YTD (non-GAAP) 96.23%  94.62%  98.33%  116.99%  111.63%
                    
Loan originations$558,729  $634,109  $485,109  $458,363  $597,562 
Purchase 88.9%  92.7%  93.0%  95.7%  95.4%
Refinance 11.1%  7.3%  7.0%  4.3%  4.6%
Gross margin on loans sold(1) 3.83%  3.93%  4.10%  3.51%  3.62%

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


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