WSBF Waterstone Financial Inc

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. GerkeChief Financial Officer414-459-4012markgerke@wsbonline.com

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIESCONSOLIDATED 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 SUBSIDIARIESCONSOLIDATED 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 SUBSIDIARIESSUMMARY 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 SUBSIDIARIESSUMMARY 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 SEGMENTSUMMARY 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 SEGMENTSUMMARY 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.