WSBF Waterstone Financial Inc

Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $5.7 million, or $0.31 per diluted share, for the quarter ended June 30, 2024 compared to net income of $4.0 million, or $0.20 per diluted share for the quarter ended June 30, 2023.  Net income per diluted share was $0.47 for the six months ended June 30, 2024, compared to net income per diluted share of $0.30 for the six months ended June 30, 2023.

“The results this quarter reflect our continued efforts over the past year to improve efficiencies at the Mortgage Banking segment,” said William Bruss, Chief Executive Officer of Waterstone Financial, Inc. "While our results have improved, we continue to face many challenges within the Mortgage Banking segment, as the mortgage banking industry continues to face unknown variables driven by consumer demand, affordable inventory, and interest rates. The Community Banking segment continues to deal with margin pressure, as short-term funding rates remain elevated due to the restrictive monetary policy of the Federal Reserve. Throughout this challenging period, we have maintained a robust share repurchase program that continues to return strong value to shareholders through repurchase activity that is accretive to book value." 

Highlights of the Quarter Ended June 30, 2024

Waterstone Financial, Inc. (Consolidated)

●	Consolidated net income of Waterstone Financial, Inc. totaled $5.7 million for the quarter ended June 30, 2024, compared to net income of $4.0 million for the quarter ended June 30, 2023.
●	Consolidated return on average assets was 1.02% for the quarter ended June 30, 2024, compared to 0.74% for the quarter ended June 30, 2023.
●	Consolidated return on average equity was 6.84% for the quarter ended June 30, 2024, and 4.41% for the quarter ended June 30, 2023.
●	Dividends declared during the quarter ended June 30, 2024, totaled $0.15 per common share.
●	During the quarter ended June 30, 2024, we repurchased approximately 481,000 shares at a cost (including the federal excise tax) of $5.8 million, or $11.99 per share. This share repurchase activity was accretive to book value per share in the amount of $0.13 during the quarter ended June 30, 2024.
●	Nonperforming assets as a percentage of total assets was 0.25% at June 30, 2024, 0.23% at March 31, 2024, and 0.19% at June 30, 2023.
●	Past due loans as a percentage of total loans was 0.76% at June 30, 2024, 0.64% at March 31, 2024, and 0.50% at June 30, 2023.
●	Book value per share was $17.20 at June 30, 2024 and $16.94 at December 31, 2023.

Community Banking Segment

●		Pre-tax income totaled $5.1 million for the quarter ended June 30, 2024, which represents a $1.3 million, or 20.5%, decrease compared to $6.4 million for the quarter ended June 30, 2023.
●		Net interest income totaled $11.2 million for the quarter ended June 30, 2024, which represents a $2.0 million, or 15.1%, decrease compared to $13.2 million for the quarter ended June 30, 2023.
●		Average loans held for investment totaled $1.67 billion during the quarter ended June 30, 2024, which represents an increase of $81.6 million, or 5.1%, compared to $1.59 billion for the quarter ended June 30, 2023. The increase was primarily due to increases in the construction and commercial real estate mortgages. Average loans held for investment increased $4.1 million compared to $1.66 billion for the quarter ended March 31, 2024. The increase was primarily due to increases in construction and commercial real estate mortgages.
●		Net interest margin decreased 46 basis points to 2.01% for the quarter ended June 30, 2024, compared to 2.47% for the quarter ended June 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 decreased 14 basis points compared to 2.15% for the quarter ended March 31, 2024, driven by an increase in weighted average cost of deposits and borrowings as the short-term borrowing rates increased resulted in increased funding rates.
●		Past due loans at the community banking segment totaled $9.3 million at June 30, 2024, $8.1 million at March 31, 2024, and $5.7 million at June 30, 2023.
●	The segment had a negative provision for credit losses related to funded loans of $197,000 for the quarter ended June 30, 2024, compared to a provision for credit losses related to funded loans of $619,000 for the quarter ended June 30, 2023. The current quarter decrease was primarily due to decrease to historical loss rates 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 $82,000 for the quarter ended June 30, 2024, compared to a negative provision for credit losses related to unfunded loan commitments of $462,000 for the quarter ended June 30, 2023. The negative provision for credit losses related to unfunded loan commitments for the quarter ended June 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 62.37% for the quarter ended June 30, 2024, compared to 55.81% for the quarter ended June 30, 2023.
●	Average deposits (excluding escrow accounts) totaled $1.22 billion during the quarter ended June 30, 2024, an increase of $35.7 million, or 3.0%, compared to $1.18 billion during the quarter ended June 30, 2023. Average deposits increased $28.8 million, or 9.7% annualized, compared to $1.19 billion for the quarter ended March 31, 2024.

Mortgage Banking Segment

●	Pre-tax income totaled $2.0 million for the quarter ended June 30, 2024, compared to $1.4 million of pre-tax loss for the quarter ended June 30, 2023.
●	Loan originations increased $10.8 million, or 1.7%, to $634.1 million during the quarter ended June 30, 2024, compared to $623.3 million during the quarter ended June 30, 2023. Origination volume relative to purchase activity accounted for 92.7% of originations for the quarter ended June 30, 2024, compared to 96.4% of total originations for the quarter ended June 30, 2023.
●	Mortgage banking non-interest income increased $2.0 million, or 8.9%, to $25.1 million for the quarter ended June 30, 2024, compared to $23.0 million for the quarter ended June 30, 2023.
●	Gross margin on loans sold totaled 3.93% for the quarter ended June 30, 2024, compared to 3.73% for the quarter ended June 30, 2023.
●	During the quarter ended June 30, 2024, the Company sold mortgage servicing rights related to $233.1 million in loans receivable and with a book value of $2.0 million for $2.1 million resulting in a gain on sale of $152,000. There was no comparable sale during the quarter ended June 30, 2023.
●	Total compensation, payroll taxes and other employee benefits decreased $1.0 million, or 5.8%, to $16.9 million during the quarter ended June 30, 2024, compared to $17.9 million during the quarter ended June 30, 2023. The decrease primarily related to decreased salary expense and health insurance expense driven by reduced employee headcount and lower claims.

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.

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
		For The Three Months Ended June 30,								For The Six Months Ended June 30,
		2024				2023				2024				2023
		(In Thousands, except per share amounts)
Interest income:
Loans		$	25,601			$	22,150			$	50,085			$	42,035
Mortgage-related securities			1,125				969				2,223				1,912
Debt securities, federal funds sold and short-term investments			1,294				1,128				2,617				2,190
Total interest income			28,020				24,247				54,925				46,137
Interest expense:
Deposits			9,716				5,955				18,686				10,043
Borrowings			7,625				5,617				14,423				9,624
Total interest expense			17,341				11,572				33,109				19,667
Net interest income			10,679				12,675				21,816				26,470
Provision (credit) for credit losses			(225	)			186				(158	)			646
Net interest income after provision (credit) for loan losses			10,904				12,489				21,974				25,824
Noninterest income:
Service charges on loans and deposits			465				611				889				1,041
Increase in cash surrender value of life insurance			804				714				1,152				1,039
Mortgage banking income			24,838				21,914				44,906				38,684
Other			390				286				798				1,315
Total noninterest income			26,497				23,525				47,745				42,079
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits			21,762				22,395				41,638				42,447
Occupancy, office furniture, and equipment			2,029				2,046				4,137				4,309
Advertising			987				944				1,901				1,833
Data processing			1,242				1,090				2,448				2,212
Communications			240				225				466				476
Professional fees			758				618				1,501				1,034
Real estate owned			1				1				14				2
Loan processing expense			861				932				1,907				1,950
Other			2,379				2,671				3,797				5,766
Total noninterest expenses			30,259				30,922				57,809				60,029
Income before income taxes			7,142				5,092				11,910				7,874
Income tax expense			1,430				1,085				3,160				1,712
Net income		$	5,712			$	4,007			$	8,750			$	6,162
Income per share:
Basic		$	0.31			$	0.20			$	0.47			$	0.30
Diluted		$	0.31			$	0.20			$	0.47			$	0.30
Weighted average shares outstanding:
Basic			18,524				20,384				18,772				20,635
Diluted			18,568				20,431				18,802				20,702

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
		June 30,				December 31,
		2024				2023
		(Unaudited)
Assets		(In Thousands, except per share amounts)
Cash		$	36,177			$	30,667
Federal funds sold			4,873				5,493
Interest-earning deposits in other financial institutions and other short-term investments			266				261
Cash and cash equivalents			41,316				36,421
Securities available for sale (at fair value)			204,835				204,907
Loans held for sale (at fair value)			222,756				164,993
Loans receivable			1,678,767				1,664,215
Less: Allowance for credit losses ("ACL") - loans			18,414				18,549
Loans receivable, net			1,660,353				1,645,666
Office properties and equipment, net			19,663				19,995
Federal Home Loan Bank stock (at cost)			23,220				20,880
Cash surrender value of life insurance			69,191				67,859
Real estate owned, net			145				254
Prepaid expenses and other assets			48,135				52,414
Total assets		$	2,289,614			$	2,213,389
Liabilities and Shareholders' Equity
Liabilities:
Demand deposits		$	182,628			$	187,107
Money market and savings deposits			274,685				273,233
Time deposits			766,610				730,284
Total deposits			1,223,923				1,190,624
Borrowings			660,824				611,054
Advance payments by borrowers for taxes			21,136				6,607
Other liabilities			48,785				61,048
Total liabilities			1,954,668				1,869,333
Shareholders' equity:
Preferred stock			-				-
Common stock			195				203
Additional paid-in capital			92,964				103,908
Retained earnings			272,778				269,606
Unearned ESOP shares			(11,276	)			(11,869	)
Accumulated other comprehensive loss, net of taxes			(19,715	)			(17,792	)
Total shareholders' equity			334,946				344,056
Total liabilities and shareholders' equity		$	2,289,614			$	2,213,389
Share Information
Shares outstanding			19,479				20,315
Book value per share		$	17.20			$	16.94

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
		At or For the Three Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
		2024				2024				2023				2023				2023
		(Dollars in Thousands, except per share amounts)
Condensed Results of Operations:
Net interest income		$	10,679			$	11,137			$	11,756			$	11,989			$	12,675
Provision (credit) for credit losses			(225	)			67				(435	)			445				186
Total noninterest income			26,497				21,248				16,876				22,230				23,525
Total noninterest expense			30,259				27,550				29,662				30,021				30,922
Income (loss) before income taxes (benefit)			7,142				4,768				(595	)			3,753				5,092
Income tax expense (benefit)			1,430				1,730				(555	)			500				1,085
Net income (loss)		$	5,712			$	3,038			$	(40	)		$	3,253			$	4,007
Income (loss) per share – basic		$	0.31			$	0.16			$	(0.00	)		$	0.16			$	0.20
Income (loss) per share – diluted		$	0.31			$	0.16			$	(0.00	)		$	0.16			$	0.20
Dividends declared per common share		$	0.15			$	0.15			$	0.15			$	0.15			$	0.20
Performance Ratios (annualized):
Return on average assets - QTD			1.02	%			0.56	%			(0.01	)%			0.58	%			0.74	%
Return on average equity - QTD			6.84	%			3.56	%			(0.05	)%			3.63	%			4.41	%
Net interest margin - QTD			2.01	%			2.15	%			2.25	%			2.26	%			2.47	%
Return on average assets - YTD			0.79	%			0.56	%			0.44	%			0.59	%			0.59	%
Return on average equity - YTD			5.17	%			3.56	%			2.62	%			3.46	%			3.37	%
Net interest margin - YTD			2.08	%			2.15	%			2.46	%			2.53	%			2.67	%
Asset Quality Ratios:
Past due loans to total loans			0.76	%			0.64	%			0.68	%			0.53	%			0.50	%
Nonaccrual loans to total loans			0.33	%			0.29	%			0.29	%			0.25	%			0.26	%
Nonperforming assets to total assets			0.25	%			0.23	%			0.23	%			0.20	%			0.19	%
Allowance for credit losses - loans to loans receivable			1.10	%			1.11	%			1.11	%			1.12	%			1.14	%

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF QUARTERLY AVERAGE BALANCES AND YIELD/COSTS
(Unaudited)
		At or For the Three Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
		2024				2024				2023				2023				2023
Average balances		(Dollars in Thousands)
Interest-earning assets
Loans receivable and held for sale		$	1,859,608			$	1,805,102			$	1,797,988			$	1,797,233			$	1,759,001
Mortgage related securities			171,895				172,077				172,863				174,202				171,938
Debt securities, federal funds sold and short-term investments			107,992				110,431				106,504				132,935				123,195
Total interest-earning assets			2,139,495				2,087,610				2,077,355				2,104,370				2,054,134
Noninterest-earning assets			104,019				103,815				105,073				105,714				108,320
Total assets		$	2,243,514			$	2,191,425			$	2,182,428			$	2,210,084			$	2,162,454
Interest-bearing liabilities
Demand accounts		$	91,300			$	87,393			$	91,868			$	90,623			$	69,147
Money market, savings, and escrow accounts			293,483				281,171				302,121				306,806				305,576
Certificates of deposit			758,252				739,543				735,418				719,708				695,310
Total interest-bearing deposits			1,143,035				1,108,107				1,129,407				1,117,137				1,070,033
Borrowings			622,771				602,724				549,210				584,764				551,545
Total interest-bearing liabilities			1,765,806				1,710,831				1,678,617				1,701,901				1,621,578
Noninterest-bearing demand deposits			93,637				92,129				102,261				106,042				130,291
Noninterest-bearing liabilities			48,315				45,484				56,859				46,805				46,446
Total liabilities			1,907,758				1,848,444				1,837,737				1,854,748				1,798,315
Equity			335,756				342,981				344,691				355,336				364,139
Total liabilities and equity		$	2,243,514			$	2,191,425			$	2,182,428			$	2,210,084			$	2,162,454
Average Yield/Costs (annualized)
Loans receivable and held for sale			5.54	%			5.46	%			5.36	%			5.26	%			5.05	%
Mortgage related securities			2.63	%			2.57	%			2.48	%			2.41	%			2.26	%
Debt securities, federal funds sold and short-term investments			4.82	%			4.82	%			4.94	%			4.45	%			3.67	%
Total interest-earning assets			5.27	%			5.18	%			5.10	%			4.97	%			4.73	%
Demand accounts			0.11	%			0.11	%			0.11	%			0.11	%			0.09	%
Money market and savings accounts			1.89	%			1.79	%			1.64	%			1.54	%			1.42	%
Certificates of deposit			4.41	%			4.19	%			3.76	%			3.43	%			2.80	%
Total interest-bearing deposits			3.42	%			3.26	%			2.90	%			2.64	%			2.23	%
Borrowings			4.92	%			4.54	%			4.83	%			4.71	%			4.08	%
Total interest-bearing liabilities			3.95	%			3.71	%			3.53	%			3.35	%			2.86	%

  

COMMUNITY BANKING SEGMENT
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
		At or For the Three Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
		2024				2024				2023				2023				2023
		(Dollars in Thousands)
Condensed Results of Operations:
Net interest income		$	11,234			$	11,598			$	12,056			$	12,431			$	13,238
Provision (credit) for credit losses			(279	)			105				(550	)			445				158
Total noninterest income			1,491				990				894				966				1,540
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits			5,116				5,360				5,397				4,618				4,683
Occupancy, office furniture and equipment			983				1,000				916				852				873
Advertising			229				174				363				200				230
Data processing			687				693				626				672				602
Communications			72				65				75				70				72
Professional fees			177				208				186				176				146
Real estate owned			1				13				1				1				1
Loan processing expense			-				-				-				-				-
Other			672				691				628				703				1,641
Total noninterest expense			7,937				8,204				8,192				7,292				8,248
Income before income taxes			5,067				4,279				5,308				5,660				6,372
Income tax expense			718				1,639				1,234				1,121				1,182
Net income		$	4,349			$	2,640			$	4,074			$	4,539			$	5,190
Efficiency ratio - QTD (non-GAAP)			62.37	%			65.17	%			63.26	%			54.43	%			55.81	%
Efficiency ratio - YTD (non-GAAP)			63.77	%			65.17	%			56.86	%			54.94	%			55.17	%

MORTGAGE BANKING SEGMENT
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(Unaudited)
		At or For the Three Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
		2024				2024				2023				2023				2023
		(Dollars in Thousands)
Condensed Results of Operations:
Net interest loss		$	(552	)		$	(541	)		$	(367	)		$	(550	)		$	(622	)
Provision for credit losses			54				(38	)			115				-				28
Total noninterest income			25,081				20,328				16,028				21,452				23,041
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits			16,886				14,756				14,881				17,186				17,929
Occupancy, office furniture and equipment			1,046				1,108				1,105				1,141				1,173
Advertising			758				740				667				716				714
Data processing			549				508				583				551				480
Communications			168				161				194				173				153
Professional fees			569				520				704				564				466
Real estate owned			-				-				-				-				-
Loan processing expense			861				1,046				756				722				932
Other			1,641				617				2,701				1,935				1,914
Total noninterest expense			22,478				19,456				21,591				22,988				23,761
Income (loss) before income taxes (benefit)			1,997				369				(6,045	)			(2,086	)			(1,370	)
Income tax expense (benefit)			684				71				(1,827	)			(657	)			(126	)
Net income (loss)		$	1,313			$	298			$	(4,218	)		$	(1,429	)		$	(1,244	)
Efficiency ratio - QTD (non-GAAP)			91.64	%			98.33	%			137.86	%			109.98	%			105.99	%
Efficiency ratio - YTD (non-GAAP)			94.62	%			98.33	%			116.99	%			111.63	%			112.49	%
Loan originations		$	634,109			$	485,109			$	458,363			$	597,562			$	623,342
Purchase			92.7	%			93.0	%			95.7	%			95.4	%			96.4	%
Refinance			7.3	%			7.0	%			4.3	%			4.6	%			3.6	%
Gross margin on loans sold(1)			3.93	%			4.10	%			3.51	%			3.62	%			3.73	%

(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