ex_453439.htm

EX-99 2 ex_453439.htm EXHIBIT 99 ex_453439.htm

Exhibit 99.1

Waterstone Financial, Inc. Announces Results of Operations for the Year Ended December 31, 2022.

WAUWATOSA, WI – 1/26/2023 – Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $935,000, or $0.04 per diluted share for the quarter ended December 31, 2022 compared to $12.6 million, or $0.53 per diluted share for the quarter ended December 31, 2021. Net income per diluted share was $0.89 for the twelve months ended December 31, 2022 compared to net income per diluted share of $2.96 for the twelve months ended December 31, 2021.

"The quarter was mixed as the community banking segment continued to achieve excellent loan growth while the mortgage banking segment lagged with lower volumes and declining margins,” said Douglas Gordon, Chief Executive Officer of Waterstone Financial, Inc. “Net interest income grew in the quarter as we added $156.0 million to the loan portfolio and efficiently used our cash as interest rates continued to rise. The mortgage banking segment continues to face significant challenges as a result of increases in mortgage rates year-over-year and the decline in affordable housing inventories. We are focused on controlling expenses and being prepared to capitalize when the mortgage market improves.”

Highlights of the Quarter Ended December 31, 2022

Waterstone Financial, Inc. (Consolidated)

●	Consolidated net income of Waterstone Financial, Inc. totaled $935,000 for the quarter ended December 31, 2022, compared to $12.6 million for the quarter ended December 31, 2021.
●	Consolidated return on average assets was 0.19% for the quarter ended December 31, 2022 compared to 2.22% for the quarter ended December 31, 2021.
●	Consolidated return on average equity was 0.99% for the quarter ended December 31, 2022 and 11.14% for the quarter ended December 31, 2021.
●	Dividends declared during the quarter ended December 31, 2022 totaled $0.20 per common share.
●	We repurchased approximately 159,000 shares at a cost of $2.6 million, or $16.53 per share, during the quarter ended December 31, 2022.
●	Nonperforming assets as percentage of total assets was 0.22% at December 31, 2022, 0.27% at September 30, 2022, and 0.26% at December 31, 2021.
●	Past due loans as percentage of total loans was 0.41% at December 31, 2022, 0.48% at September 30, 2022, and 0.59% at December 31, 2021.
●	Book value per share was $16.71 at December 31, 2022 and $17.45 at December 31, 2021. The decrease reflects an $0.79 per share impact resulting from an increase in the unrealized loss on available for sale securities.

Community Banking Segment

●	Pre-tax income totaled $7.0 million for the quarter ended December 31, 2022, which represents a $1.4 million, or 16.4%, decrease compared to $8.4 million for the quarter ended December 31, 2021.
●	Net interest income totaled $15.7 million for the quarter ended December 31, 2022, which represents a $2.5 million, or 19.2%, increase compared to $13.2 million for the quarter ended December 31, 2021.
●	Average loans held for investment totaled $1.41 billion during the quarter ended December 31, 2022, which represents an increase of $201.9 million, or 16.7%, compared to $1.21 billion for the quarter ended December 31, 2021. Average loans held for investment increased $102.1 million compared to $1.31 billion for the quarter ended September 30, 2022.
●	The community banking segment purchased $112.0 million adjustable-rate loans that were originated by the mortgage banking segment during the quarter ended December 31, 2022. Other noninterest expense includes fees totaling $2.0 million during the quarter ended December 31, 2022 which were paid to the mortgage banking segment and eliminated on a consolidated basis.
●	Net interest margin increased 82 basis points to 3.29% for the quarter ended December 31, 2022 compared to 2.47% for the quarter ended December 31, 2021, which was a result of a decrease in the average balance of cash, as funds were utilized to fund loans held for investment, purchase investment securities and pay down borrowings. In addition, yields increased on loans receivable, loans held for sale, mortgage related securities, debt securities, federal funds sold and short term investments category. Net interest margin decreased five basis points compared to 3.34% for the quarter ended September 30, 2022, 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 provision for credit losses - loans of $290,000 for the quarter ended December 31, 2022 compared to a negative provision for loan losses of $1.5 million for the quarter ended December 31, 2021. The current quarter increase was primarily due to an increase in loans held for investment during the quarter. The provision for credit losses - unfunded commitments was $334,000 as the loan pipeline increased from the prior quarter end.
●	The efficiency ratio was 54.49% for the quarter ended December 31, 2022, compared to 53.02% for the quarter ended December 31, 2021.
●	Average deposits (excluding escrow accounts) totaled $1.21 billion during the quarter ended December 31, 2022, a decrease of $35.3 million, or 2.8%, compared to $1.25 billion during the quarter ended December 31, 2021. Average deposits increased $18.1 million, or 6.1% annualized compared to the $1.19 billion for the quarter ended September 30, 2022 due to an increase in certificate of deposits rates attracting more customers.
●	Other noninterest expense increased $1.8 million to $2.5 million during the quarter ended December 31, 2022 compared to $651,000 during the quarter ended December 31, 2021. The increase was driven by fees paid to the mortgage banking segment for the purchase of single-family adjustable rate mortgage loans. See the note on the loans purchased from the mortgage banking segment above. These fees are eliminated in the consolidated statements of income.

Mortgage Banking Segment

●	Pre-tax loss totaled $6.5 million for the quarter ended December 31, 2022, compared to $7.3 million of pre-tax income for the quarter ended December 31, 2021.
●	Loan originations decreased $446.5 million, or 45.0%, to $546.6 million during the quarter ended December 31, 2022, compared to $993.1 million during the quarter ended December 31, 2021. Origination volume relative to purchase activity accounted for 95.6% of originations for the quarter ended December 31, 2022 compared to 73.8% of total originations for the quarter ended December 31, 2021.
●	Mortgage banking non-interest income decreased $22.6 million, or 55.6%, to $18.1 million for the quarter ended December 31, 2022, compared to $40.7 million for the quarter ended December 31, 2021.
●	Gross margin on loans sold decreased to 3.41% for the quarter ended December 31, 2022, compared to 4.18% for the quarter ended December 31, 2021.
●	Total compensation, payroll taxes and other employee benefits decreased $10.5 million, or 37.6%, to $17.4 million during the quarter ended December 31, 2022 compared to $27.9 million during the quarter ended December 31, 2021. 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 increased $1.1 million to $2.6 million during the quarter ended December 31, 2022 compared to $1.4 million during the quarter ended December 31, 2021. The increase related to an increase in provision of loan sale losses.
●	During the year ended December 31, 2022 the segment has added 11 branches and a total of 130 loan origination personnel. Losses associated with these new branches totaled approximately $725,000 for the quarter ended December 31, 2022 and $1.9 million for the year ended December 31, 2022. These branch losses are net of corporate revenue of approximately $641,000 for the quarter ended December 31, 2022 and $1.2 million for the year ended December 31, 2022.

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 Twelve Months Ended December 31,
	2022			2021			2022		2021
	(In Thousands, except per share amounts)
Interest income:
Loans	$	18,654		$	15,152		$	62,935	$	64,366
Mortgage-related securities		915			506			3,241		1,954
Debt securities, federal funds sold and short-term investments		1,105			926			4,069		3,563
Total interest income		20,674			16,584			70,245		69,883
Interest expense:
Deposits		2,352			878			4,863		4,420
Borrowings		2,711			2,534			8,428		9,948
Total interest expense		5,063			3,412			13,291		14,368
Net interest income		15,611			13,172			56,954		55,515
Provision (credit) for credit losses (1)		664			(1,470	)		968		(3,990	)
Net interest income after provision for loan losses		14,947			14,642			55,986		59,505
Noninterest income:
Service charges on loans and deposits		497			842			2,202		3,325
Increase in cash surrender value of life insurance		344			318			1,738		1,615
Mortgage banking income		15,811			40,448			99,560		191,035
Other		443			408			2,055		7,220
Total noninterest income		17,095			42,016			105,555		203,195
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		22,063			32,837			99,565		135,115
Occupancy, office furniture, and equipment		2,166			2,266			8,706		9,612
Advertising		972			958			3,976		3,528
Data processing		1,040			1,079			4,470		3,950
Communications		289			321			1,189		1,309
Professional fees		612			471			1,815		1,275
Real estate owned		13			14			19		3
Loan processing expense		1,059			940			4,744		4,610
Other		3,170			2,088			12,578		11,192
Total noninterest expenses		31,384			40,974			137,062		170,594
Income before income taxes		658			15,684			24,479		92,106
Income tax (benefit) expense		(277	)		3,131			4,992		21,315
Net income	$	935		$	12,553		$	19,487	$	70,791
Income per share:
Basic	$	0.04		$	0.53		$	0.89	$	2.98
Diluted	$	0.04		$	0.53		$	0.89	$	2.96
Weighted average shares outstanding:
Basic		20,966			23,598			21,884		23,741
Diluted		21,069			23,802			22,010		23,931

⁽¹⁾ The Company adopted ASU 2016-13 as of January 1, 2022. The 2021 amount presented is calculated under the prior accounting standard.

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	December 31,			December 31,
	2022			2021
	(Unaudited)
Assets	(In Thousands, except per share amounts)
Cash	$	33,700		$	343,016
Federal funds sold		10,683			13,981
Interest-earning deposits in other financial institutions and other short term investments		2,259			19,725
Cash and cash equivalents		46,642			376,722
Securities available for sale (at fair value)		196,588			179,016
Loans held for sale (at fair value)		131,188			312,738
Loans receivable		1,510,178			1,205,785
Less: Allowance for credit losses ("ACL") - loans (1)		17,757			15,778
Loans receivable, net		1,492,421			1,190,007

Office properties and equipment, net		21,105			22,273
Federal Home Loan Bank stock (at cost)		17,357			24,438
Cash surrender value of life insurance		66,443			65,368
Real estate owned, net		145			148
Prepaid expenses and other assets		59,783			45,148
Total assets	$	2,031,672		$	2,215,858

Liabilities and Shareholders' Equity
Liabilities:
Demand deposits	$	230,596		$	214,409
Money market and savings deposits		326,145			392,314
Time deposits		642,271			626,663
Total deposits		1,199,012			1,233,386

Borrowings		386,784			477,127
Advance payments by borrowers for taxes		5,334			4,094
Other liabilities		70,056			68,478
Total liabilities		1,661,186			1,783,085

Shareholders' equity:
Preferred stock		-			-
Common stock		222			248
Additional paid-in capital		128,550			174,505
Retained earnings		274,246			273,398
Unearned ESOP shares		(13,056	)		(14,243	)
Accumulated other comprehensive loss, net of taxes		(19,476	)		(1,135	)
Total shareholders' equity		370,486			432,773
Total liabilities and shareholders' equity	$	2,031,672		$	2,215,858

Share Information
Shares outstanding		22,174			24,795
Book value per share	$	16.71		$	17.45

⁽¹⁾ The Company adopted ASU 2016-13 as of January 1, 2022. The 2021 amount presented is calculated under the prior accounting standard.

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,
	2022			2022			2022			2022			2021
	(Dollars in Thousands, except per share amounts)
Condensed Results of Operations:
Net interest income	$	15,611		$	15,398		$	14,081		$	11,864		$	13,172
Provision (credit) for credit losses (1)		664			332			48			(76	)		(1,470	)
Total noninterest income		17,095			27,404			31,238			29,818			42,016
Total noninterest expense		31,384			35,694			35,050			34,935			40,974
Income before income taxes		658			6,776			10,221			6,823			15,684
Income tax (benefit) expense		(277	)		1,506			2,231			1,532			3,131
Net income	$	935		$	5,270		$	7,990		$	5,291		$	12,553
Income per share – basic	$	0.04		$	0.25		$	0.36		$	0.23		$	0.53
Income per share – diluted	$	0.04		$	0.25		$	0.36		$	0.23		$	0.53
Dividends declared per share	$	0.20		$	0.20		$	0.20		$	0.20		$	0.70

Performance Ratios (annualized):
Return on average assets - QTD		0.19	%		1.08	%		1.61	%		1.00	%		2.22	%
Return on average equity - QTD		0.99	%		5.38	%		7.93	%		5.00	%		11.14	%
Net interest margin - QTD		3.29	%		3.34	%		3.02	%		2.38	%		2.47	%

Return on average assets - YTD		0.96	%		1.22	%		1.30	%		1.00	%		3.20	%
Return on average equity - YTD		4.91	%		6.09	%		6.42	%		5.00	%		16.38	%
Net interest margin - YTD		3.00	%		2.90	%		2.69	%		2.38	%		2.68	%

Asset Quality Ratios:
Past due loans to total loans		0.41	%		0.48	%		0.60	%		0.53	%		0.59	%
Nonaccrual loans to total loans		0.29	%		0.37	%		0.59	%		0.55	%		0.46	%
Nonperforming assets to total assets		0.22	%		0.27	%		0.39	%		0.34	%		0.26	%
Allowance for credit losses to loans receivable (1)		1.18	%		1.29	%		1.35	%		1.40	%		1.31	%

⁽¹⁾ The Company adopted ASU 2016-13 as of January 1, 2022. The 2021 amounts presented are calculated under the prior accounting standard.

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,
	2022			2022			2022			2022			2021
Average balances	(Dollars in Thousands)
Interest-earning assets
Loans receivable and held for sale	$	1,578,790		$	1,492,462		$	1,433,452		$	1,361,839		$	1,517,984
Mortgage related securities		170,209			172,807			168,000			138,863			119,709
Debt securities, federal funds sold and short term investments		130,973			162,211			269,823			519,116			475,574
Total interest-earning assets		1,879,972			1,827,480			1,871,275			2,019,818			2,113,267
Noninterest-earning assets		122,643			114,274			117,248			128,813			131,703
Total assets	$	2,002,615		$	1,941,754		$	1,988,523		$	2,148,631		$	2,244,970

Interest-bearing liabilities
Demand accounts	$	75,449		$	75,058		$	70,674		$	69,736		$	70,762
Money market, savings, and escrow accounts		349,820			398,643			412,321			404,413			398,210
Certificates of deposit		628,375			586,012			584,244			610,681			643,546
Total interest-bearing deposits		1,053,644			1,059,713			1,067,239			1,084,830			1,112,518
Borrowings		333,249			296,111			326,068			440,252			481,971
Total interest-bearing liabilities		1,386,893			1,355,824			1,393,307			1,525,082			1,594,489
Noninterest-bearing demand deposits		177,217			153,591			154,070			152,900			153,303
Noninterest-bearing liabilities		63,866			43,683			36,962			41,232			49,982
Total liabilities		1,627,976			1,553,098			1,584,339			1,719,214			1,797,774
Equity		374,639			388,656			404,184			429,417			447,196
Total liabilities and equity	$	2,002,615		$	1,941,754		$	1,988,523		$	2,148,631		$	2,244,970

Average Yield/Costs (annualized)
Loans receivable and held for sale		4.69	%		4.32	%		4.07	%		4.02	%		3.96	%
Mortgage related securities		2.13	%		2.07	%		1.96	%		1.76	%		1.68	%
Debt securities, federal funds sold and short term investments		3.35	%		2.41	%		1.56	%		0.72	%		0.77	%
Total interest-earning assets		4.36	%		3.93	%		3.52	%		3.02	%		3.11	%

Demand accounts		0.08	%		0.08	%		0.09	%		0.08	%		0.08	%
Money market and savings accounts		0.67	%		0.21	%		0.19	%		0.21	%		0.22	%
Certificates of deposit		1.10	%		0.51	%		0.37	%		0.37	%		0.40	%
Total interest-bearing deposits		0.89	%		0.37	%		0.28	%		0.29	%		0.31	%
Borrowings		3.23	%		2.34	%		1.95	%		2.20	%		2.09	%
Total interest-bearing liabilities		1.45	%		0.80	%		0.67	%		0.84	%		0.85	%

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,
	2022			2022			2022			2022			2021
	(Dollars in Thousands)
Condensed Results of Operations:
Net interest income	$	15,737		$	15,507		$	13,710		$	11,652		$	13,197
Provision (credit) for credit losses ⁽¹⁾		624			234			(41	)		(140	)		(1,500	)
Total noninterest income		1,033			1,116			1,640			1,432			1,459
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		4,781			4,424			4,596			5,212			5,085
Occupancy, office furniture and equipment		877			955			876			937			960
Advertising		203			213			244			227			278
Data processing		551			539			531			608			531
Communications		92			108			63			94			100
Professional fees		153			123			118			114			151
Real estate owned		13			1			-			5			14
Loan processing expense		-			-			-			-			-
Other		2,468			1,477			1,006			600			651
Total noninterest expense		9,138			7,840			7,434			7,797			7,770
Income before income taxes		7,008			8,549			7,957			5,427			8,386
Income tax expense		1,308			1,983			1,658			1,167			1,690
Net income	$	5,700		$	6,566		$	6,299		$	4,260		$	6,696

Efficiency ratio - QTD		54.49	%		47.16	%		48.43	%		59.59	%		53.02	%
Efficiency ratio - YTD		52.10	%		51.20	%		53.57	%		59.59	%		48.58	%

⁽¹⁾ The Company adopted ASU 2016-13 as of January 1, 2022. The 2021 amounts presented are calculated under the prior accounting standard.

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,
	2022			2022			2022			2022			2021
	(Dollars in Thousands)
Condensed Results of Operations:
Net interest (loss) income	$	(241	)	$	(155	)	$	370		$	183		$	(49	)
Provision for credit losses ⁽²⁾		40			98			89			64			30
Total noninterest income		18,066			27,305			30,126			28,604			40,692
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		17,397			21,864			21,311			20,438			27,866
Occupancy, office furniture and equipment		1,289			1,341			1,180			1,251			1,306
Advertising		769			924			718			678			680
Data processing		490			543			613			588			542
Communications		197			194			195			246			221
Professional fees		453			265			222			338			306
Real estate owned		-			-			-			-			-
Loan processing expense		1,059			1,120			1,134			1,431			940
Other		2,584			2,571			2,733			2,309			1,445
Total noninterest expense		24,238			28,822			28,106			27,279			33,306
(Loss) income before income taxes		(6,453	)		(1,770	)		2,301			1,444			7,307
Income tax (benefit) expense		(1,602	)		(470	)		578			377			1,443
Net (loss) income	$	(4,851	)	$	(1,300	)	$	1,723		$	1,067		$	5,864

Efficiency ratio - QTD		135.98	%		106.16	%		92.16	%		94.76	%		81.95	%
Efficiency ratio - YTD		104.02	%		97.42	%		93.42	%		94.76	%		71.44	%

Loan originations	$	546,628		$	729,897		$	778,760		$	708,463		$	993,113
Purchase		95.6	%		94.2	%		90.4	%		77.3	%		73.8	%
Refinance		4.4	%		5.8	%		9.6	%		22.7	%		26.2	%
Gross margin on loans sold⁽¹⁾		3.41	%		3.70	%		3.85	%		4.00	%		4.18	%

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

⁽²⁾ The Company adopted ASU 2016-13 as of January 1, 2022. The 2021 amounts presented are calculated under the prior accounting standard.