ex_600480.htm

EX-99.1 2 ex_600480.htm EXHIBIT 99.1 ex_600480.htm

Exhibit 99.1

Waterstone Financial, Inc. Announces Results of Operations for the Quarter and Year Ended December 31, 2023.

WAUWATOSA, WI – 1/30/2024 – Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported a net loss of $40,000, or less than $0.01 per diluted share, for the quarter ended December 31, 2023 compared to net income of $935,000, or $0.04 per diluted share for the quarter ended December 31, 2022. Net income per diluted share was $0.46 for the twelve months ended December 31, 2023 compared to net income per diluted share of $0.89 for the twelve months ended December 31, 2022.

“The current market dynamics continue to present challenges for both our Community Banking and Mortgage Banking segments.” said William Bruss, Chief Executive Officer of Waterstone Financial, Inc. "The rapid rise in short-term interest rates and an inverted yield curve continue to create downward pressure on the net interest margin of the Community Banking segment. In addition, the housing market continues to be adversely impacted by elevated interest rates, which have resulted in low levels of inventory and a decrease in housing affordability. As is the case for the overall mortgage banking industry, the results of operations within our Mortgage Banking segment have been negatively impacted by declining mortgage origination volumes and compressed margins. In spite of these challenges, our strong asset quality and robust level of capital allowed us to continue to provide strong shareholder returns throughout 2023. During the year ended December 31, 2023, we declared dividends of $0.70 per share and repurchased 1.9 million shares of our stock at an average price well below our current book value per share.”

Highlights of the Quarter and Year Ended December 31, 2023

Waterstone Financial, Inc. (Consolidated)

●	Consolidated net loss of Waterstone Financial, Inc. totaled $40,000 for the quarter ended December 31, 2023, compared to net income of $935,000 for the quarter ended December 31, 2022.
●	Consolidated return on average assets was (0.01)% for the quarter ended December 31, 2023 compared to 0.19% for the quarter ended December 31, 2022.
●	Consolidated return on average equity was (0.05)% for the quarter ended December 31, 2023 and 0.99% for the quarter ended December 31, 2022.
●	Dividends declared during the quarter ended December 31, 2023 totaled $0.15 per common share.
●	During the quarter ended December 31, 2023 , we repurchased approximately 545,000 shares at a cost (including the federal excise tax) of $6.2 million, or $11.36 per share. This share repurchase activity was accretive to book value per share in the amount of $0.14 during the quarter ended December 31, 2023 .
●	During the year ended December 31, 2023 , we repurchased approximately 1.9 million shares at a cost (including the federal excise tax) of $26.0 million, or $13.38 per share, This share repurchase activity was accretive to book value per share in the $0.32 during the year ended December 31, 2023 .
●	Nonperforming assets as percentage of total assets was 0.23% at December 31, 2023, 0.20% at September 30, 2023, and 0.22% at December 31, 2022.
●	Past due loans as a percentage of total loans was 0.68% at December 31, 2023, 0.53% at September 30, 2023, and 0.41% at December 31, 2022.
●	Book value per share was $16.94 at December 31, 2023 and $16.71 at December 31, 2022.

Community Banking Segment

●	Pre-tax income totaled $5.3 million for the quarter ended December 31, 2023, which represents a $1.7 million, or 24.3%, decrease compared to $7.0 million for the quarter ended December 31, 2022.
●	Past due loans at the community banking segment totaled $7.9 million at December 31, 2023, $6.7 million at September 30, 2023, and $4.8 million at December 31, 2022.
●	Net interest income totaled $12.1 million for the quarter ended December 31, 2023, which represents a $3.7 million, or 23.4%, decrease compared to $15.7 million for the quarter ended December 31, 2022.
●	Average loans held for investment totaled $1.66 billion during the quarter ended December 31, 2023, which represents an increase of $247.2 million, or 17.5%, compared to $1.41 billion for the quarter ended December 31, 2022. The increase was primarily due to increases in the single-family, multi-family, and commercial real estate mortgages. Average loans held for investment increased $33.1 million compared to $1.63 billion for the quarter ended September 30, 2023. The increase was primarily due to an increase in single-family and commercial real estate mortgages.
●	Net interest margin decreased 104 basis points to 2.25% for the quarter ended December 31, 2023 compared to 3.29% for the quarter ended December 31, 2022, 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 one basis point compared to 2.26% for the quarter ended September 30, 2023, driven by an increase in weighted average cost of deposits and borrowings as the federal funds rate increases resulted in increased funding rates.

●	The segment had a negative provision for credit losses related to funded loans of $17,000 for the quarter ended December 31, 2023 compared to a provision for credit losses related to funded loans of $290,000 for the quarter ended December 31, 2022. The current quarter decrease was primarily due to historical loss rates continuing to decrease. The negative provision for credit losses related to unfunded loan commitments was $533,000 for the quarter ended December 31, 2023 compared to a provision for credit losses related to unfunded loan commitments of $334,000 for the quarter ended December 31, 2022. The decrease for the quarter ended December 31, 2023 was due primarily to a decrease of loans in the loan commitment pipeline as loan activity decreased during the quarter and loans from the prior quarter pipeline funded.
●	The efficiency ratio, a non-GAAP ratio, was 63.26% for the quarter ended December 31, 2023, compared to 54.49% for the quarter ended December 31, 2022.
●	Average deposits (excluding escrow accounts) totaled $1.21 billion during the quarter ended December 31, 2023, a decrease of $1.7 million, or 0.1%, compared to $1.21 billion during the quarter ended December 31, 2022. Average deposits increased $10.4 million, or 3.5% annualized, compared to the $1.20 billion for the quarter ended September 30, 2023.
●	Other noninterest expense decreased $1.8 million to $628,000 during the quarter ended December 31, 2023 compared to $2.5 million during the quarter ended December 31, 2022. The decrease was driven by fees paid to the mortgage banking segment for the purchase of single-family adjustable rate mortgage loans. These fees totaled $44,000 during the quarter ended December 31, 2023 compared to $2.0 million during the quarter ended December 31, 2022.

Mortgage Banking Segment

●	Pre-tax loss totaled $6.0 million for the quarter ended December 31, 2023, compared to $6.5 million of pre-tax loss for the quarter ended December 31, 2022.
●	Loan originations decreased $88.3 million, or 16.1%, to $458.4 million during the quarter ended December 31, 2023, compared to $546.6 million during the quarter ended December 31, 2022. Origination volume relative to purchase activity accounted for 95.7% of originations for the quarter ended December 31, 2023 compared to 95.6% of total originations for the quarter ended December 31, 2022.
●	Mortgage banking non-interest income decreased $2.0 million, or 11.3%, to $16.0 million for the quarter ended December 31, 2023, compared to $18.1 million for the quarter ended December 31, 2022.
●	Gross margin on loans sold totaled 3.51% for the quarter ended December 31, 2023, compared to 3.41% for the quarter ended December 31, 2022.
●	Total compensation, payroll taxes and other employee benefits decreased $2.5 million, or 14.5%, to $14.9 million during the quarter ended December 31, 2023 compared to $17.4 million during the quarter ended December 31, 2022. The decrease primarily related to decreased commission expense and salary expense driven by decreased loan origination volume and reduced employee headcount.

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 December 31,						For The Twelve Months Ended December 31,
	2023			2022			2023		2022
	(In Thousands, except per share amounts)
Interest income:
Loans	$	24,288		$	18,654		$	90,148	$	62,935
Mortgage-related securities		1,081			915			4,053		3,241
Debt securities, federal funds sold and short-term investments		1,325			1,105			5,007		4,069
Total interest income		26,694			20,674			99,208		70,245
Interest expense:
Deposits		8,253			2,352			25,738		4,863
Borrowings		6,685			2,711			23,255		8,428
Total interest expense		14,938			5,063			48,993		13,291
Net interest income		11,756			15,611			50,215		56,954
Provision (credit) for credit losses		(435	)		664			656		968
Net interest income after provision (credit) for loan losses		12,191			14,947			49,559		55,986
Noninterest income:
Service charges on loans and deposits		328			497			1,819		2,202
Increase in cash surrender value of life insurance		337			344			1,710		1,738
Mortgage banking income		15,830			15,811			75,686		99,560
Other		381			443			1,970		2,055
Total noninterest income		16,876			17,095			81,185		105,555
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		20,061			22,063			84,096		99,565
Occupancy, office furniture, and equipment		2,021			2,166			8,323		8,706
Advertising		1,030			972			3,779		3,976
Data processing		1,212			1,040			4,653		4,470
Communications		269			289			988		1,189
Professional fees		907			612			2,686		1,815
Real estate owned		1			13			4		19
Loan processing expense		756			1,059			3,428		4,744
Other		3,405			3,170			11,755		12,578
Total noninterest expenses		29,662			31,384			119,712		137,062
(Loss) income before income taxes		(595	)		658			11,032		24,479
Income tax (benefit) expense		(555	)		(277	)		1,657		4,992
Net (loss) income	$	(40	)	$	935		$	9,375	$	19,487
(Loss) income per share:
Basic	$	(0.00	)	$	0.04		$	0.47	$	0.89
Diluted	$	(0.00	)	$	0.04		$	0.46	$	0.89
Weighted average shares outstanding:
Basic		19,380			20,966			20,158		21,884
Diluted		19,398			21,069			20,196		22,010

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	December 31,			December 31,
	2023			2022
	(Unaudited)
Assets	(In Thousands, except per share amounts)
Cash	$	30,667		$	33,700
Federal funds sold		5,493			10,683
Interest-earning deposits in other financial institutions and other short term investments		261			2,259
Cash and cash equivalents		36,421			46,642
Securities available for sale (at fair value)		204,907			196,588
Loans held for sale (at fair value)		164,993			131,188
Loans receivable		1,664,215			1,510,178
Less: Allowance for credit losses ("ACL") - loans		18,549			17,757
Loans receivable, net		1,645,666			1,492,421

Office properties and equipment, net		19,995			21,105
Federal Home Loan Bank stock (at cost)		20,880			17,357
Cash surrender value of life insurance		67,859			66,443
Real estate owned, net		254			145
Prepaid expenses and other assets		52,414			59,783
Total assets	$	2,213,389		$	2,031,672

Liabilities and Shareholders' Equity
Liabilities:
Demand deposits	$	187,107		$	230,596
Money market and savings deposits		273,233			326,145
Time deposits		730,284			642,271
Total deposits		1,190,624			1,199,012

Borrowings		611,054			386,784
Advance payments by borrowers for taxes		6,607			5,334
Other liabilities		61,048			70,056
Total liabilities		1,869,333			1,661,186

Shareholders' equity:
Preferred stock		-			-
Common stock		203			222
Additional paid-in capital		103,908			128,550
Retained earnings		269,606			274,246
Unearned ESOP shares		(11,869	)		(13,056	)
Accumulated other comprehensive loss, net of taxes		(17,792	)		(19,476	)
Total shareholders' equity		344,056			370,486
Total liabilities and shareholders' equity	$	2,213,389		$	2,031,672

Share Information
Shares outstanding		20,315			22,174
Book value per share	$	16.94		$	16.71

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,
	2023			2023			2023			2023			2022
	(Dollars in Thousands, except per share amounts)
Condensed Results of Operations:
Net interest income	$	11,756		$	11,989		$	12,675		$	13,795		$	15,611
Provision (credit) for credit losses		(435	)		445			186			460			664
Total noninterest income		16,876			22,230			23,525			18,554			17,095
Total noninterest expense		29,662			30,021			30,922			29,107			31,384
Income before income taxes		(595	)		3,753			5,092			2,782			658
Income tax (benefit) expense		(555	)		500			1,085			627			(277	)
Net (loss) income	$	(40	)	$	3,253		$	4,007		$	2,155		$	935
(Loss) income per share – basic	$	(0.00	)	$	0.16		$	0.20		$	0.10		$	0.04
(Loss) income per share – diluted	$	(0.00	)	$	0.16		$	0.20		$	0.10		$	0.04
Dividends declared per common share	$	0.15		$	0.15		$	0.20		$	0.20		$	0.20

Performance Ratios (annualized):
Return on average assets - QTD		(0.01	)%		0.58	%		0.74	%		0.43	%		0.19	%
Return on average equity - QTD		(0.05	)%		3.63	%		4.41	%		2.35	%		0.99	%
Net interest margin - QTD		2.25	%		2.26	%		2.47	%		2.88	%		3.29	%

Return on average assets - YTD		0.44	%		0.59	%		0.59	%		0.43	%		0.96	%
Return on average equity - YTD		2.62	%		3.46	%		3.37	%		2.35	%		4.91	%
Net interest margin - YTD		2.46	%		2.53	%		2.67	%		2.88	%		3.00	%

Asset Quality Ratios:
Past due loans to total loans		0.68	%		0.53	%		0.50	%		0.64	%		0.41	%
Nonaccrual loans to total loans		0.29	%		0.25	%		0.26	%		0.29	%		0.29	%
Nonperforming assets to total assets		0.23	%		0.20	%		0.19	%		0.22	%		0.22	%
Allowance for credit losses - loans to loans receivable		1.11	%		1.12	%		1.14	%		1.14	%		1.18	%

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,
	2023			2023			2023			2023			2022
Average balances	(Dollars in Thousands)
Interest-earning assets
Loans receivable and held for sale	$	1,797,988		$	1,797,233		$	1,759,001		$	1,654,942		$	1,578,790
Mortgage related securities		172,863			174,202			171,938			170,218			170,209
Debt securities, federal funds sold and short term investments		106,504			132,935			123,195			115,962			130,973
Total interest-earning assets		2,077,355			2,104,370			2,054,134			1,941,122			1,879,972
Noninterest-earning assets		105,073			105,714			108,320			107,009			122,643
Total assets	$	2,182,428		$	2,210,084		$	2,162,454		$	2,048,131		$	2,002,615

Interest-bearing liabilities
Demand accounts	$	91,868		$	90,623		$	69,147		$	68,564		$	75,449
Money market, savings, and escrow accounts		302,121			306,806			305,576			322,220			349,820
Certificates of deposit		735,418			719,708			695,310			648,531			628,375
Total interest-bearing deposits		1,129,407			1,117,137			1,070,033			1,039,315			1,053,644
Borrowings		549,210			584,764			551,545			441,716			333,249
Total interest-bearing liabilities		1,678,617			1,701,901			1,621,578			1,481,031			1,386,893
Noninterest-bearing demand deposits		102,261			106,042			130,291			143,296			177,217
Noninterest-bearing liabilities		56,859			46,805			46,446			51,840			63,866
Total liabilities		1,837,737			1,854,748			1,798,315			1,676,167			1,627,976
Equity		344,691			355,336			364,139			371,964			374,639
Total liabilities and equity	$	2,182,428		$	2,210,084		$	2,162,454		$	2,048,131		$	2,002,615

Average Yield/Costs (annualized)
Loans receivable and held for sale		5.36	%		5.26	%		5.05	%		4.87	%		4.69	%
Mortgage related securities		2.48	%		2.41	%		2.26	%		2.25	%		2.13	%
Debt securities, federal funds sold and short term investments		4.94	%		4.45	%		3.67	%		3.71	%		3.35	%
Total interest-earning assets		5.10	%		4.97	%		4.73	%		4.57	%		4.36	%

Demand accounts		0.11	%		0.11	%		0.09	%		0.08	%		0.08	%
Money market and savings accounts		1.64	%		1.54	%		1.42	%		1.26	%		0.67	%
Certificates of deposit		3.76	%		3.43	%		2.80	%		1.92	%		1.10	%
Total interest-bearing deposits		2.90	%		2.64	%		2.23	%		1.60	%		0.89	%
Borrowings		4.83	%		4.71	%		4.08	%		3.68	%		3.23	%
Total interest-bearing liabilities		3.53	%		3.35	%		2.86	%		2.22	%		1.45	%

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,
	2023			2023			2023			2023			2022
	(Dollars in Thousands)
Condensed Results of Operations:
Net interest income	$	12,056		$	12,431		$	13,238		$	14,008		$	15,737
Provision (credit) for credit losses		(550	)		445			158			388			624
Total noninterest income		894			966			1,540			987			1,033
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		5,397			4,618			4,683			5,168			4,781
Occupancy, office furniture and equipment		916			852			873			1,031			877
Advertising		363			200			230			184			203
Data processing		626			672			602			601			551
Communications		75			70			72			78			92
Professional fees		186			176			146			218			153
Real estate owned		1			1			1			1			13
Loan processing expense		-			-			-			-			-
Other		628			703			1,641			896			2,468
Total noninterest expense		8,192			7,292			8,248			8,177			9,138
Income before income taxes		5,308			5,660			6,372			6,430			7,008
Income tax expense		1,234			1,121			1,182			1,600			1,308
Net income	$	4,074		$	4,539		$	5,190		$	4,830		$	5,700

Efficiency ratio - QTD (non-GAAP)		63.26	%		54.43	%		55.81	%		54.53	%		54.49	%
Efficiency ratio - YTD (non-GAAP)		56.86	%		54.94	%		55.17	%		54.53	%		52.10	%

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,
	2023			2023			2023			2023			2022
	(Dollars in Thousands)
Condensed Results of Operations:
Net interest loss	$	(367	)	$	(550	)	$	(622	)	$	(282	)	$	(241	)
Provision for credit losses		115			-			28			72			40
Total noninterest income		16,028			21,452			23,041			17,951			18,066
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		14,881			17,186			17,929			15,099			17,397
Occupancy, office furniture and equipment		1,105			1,141			1,173			1,232			1,289
Advertising		667			716			714			705			769
Data processing		583			551			480			516			490
Communications		194			173			153			173			197
Professional fees		704			564			466			188			453
Real estate owned		-			-			-			-			-
Loan processing expense		756			722			932			1,018			1,059
Other		2,701			1,935			1,914			2,403			2,584
Total noninterest expense		21,591			22,988			23,761			21,334			24,238
Loss before income taxes		(6,045	)		(2,086	)		(1,370	)		(3,737	)		(6,453	)
Income tax benefit		(1,827	)		(657	)		(126	)		(1,002	)		(1,602	)
Net loss	$	(4,218	)	$	(1,429	)	$	(1,244	)	$	(2,735	)	$	(4,851	)

Efficiency ratio - QTD (non-GAAP)		137.86	%		109.98	%		105.99	%		120.74	%		135.98	%
Efficiency ratio - YTD (non-GAAP)		116.99	%		111.63	%		112.49	%		120.74	%		104.02	%

Loan originations	$	458,363		$	597,562		$	623,342		$	442,710		$	546,628
Purchase		95.7	%		95.4	%		96.4	%		96.5	%		95.6	%
Refinance		4.3	%		4.6	%		3.6	%		3.5	%		4.4	%
Gross margin on loans sold⁽¹⁾		3.51	%		3.62	%		3.73	%		3.78	%		3.41	%

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