Waterstone Financial, Inc. Announces Results of Operations for the Quarter and Six Months Ended June 30, 2019.

WAUWATOSA, WI – 07/24/2019 – Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $9.6 million, or $0.37 per diluted share for the quarter ended June 30, 2019 compared to $9.4 million, or $0.34 per diluted share for the quarter ended June 30, 2018. Net income per diluted share was $0.61 for the six months ended June 30, 2019 compared to net income per diluted share of $0.59 for the six months ended June 30, 2018.

“We achieved a record second quarter net income of $9.6 million and diluted earnings per share of $0.37,” said Douglas Gordon, CEO of Waterstone Financial, Inc. “The Community Banking segment continues to focus on organic growth, maintaining strong asset quality and making strategic investments for the future. The Mortgage Banking segment executed well in the second quarter including originating its highest loan volume for a month of May. As a result of our continued strong performance and well capitalized position, we were able to enter into a new share repurchase program during the quarter and continue declaring a quarterly dividend showing our commitment to increasing shareholder value.”

Highlights of the Quarter Ended June 30, 2019

Waterstone Financial, Inc. (Consolidated)

•	Consolidated net income of Waterstone Financial, Inc. totaled $9.6 million for the quarter ended June 30, 2019, compared to $9.4 million for the quarter ended June 30, 2018.

•	Consolidated return on average assets was 1.95% for the quarter ended June 30, 2019 compared to 2.02% for the quarter ended June 30, 2018.

•	Consolidated return on average equity was 9.96% for the quarter ended June 30, 2019 and 9.40% for the quarter ended June 30, 2018.

•	The Company repurchased a total 384,500 shares on the open market during the quarter ended June 30, 2019 at an average price of $16.74 per share for a total of 846,900 shares at an average price of $16.62 per share during the six months ended June 30, 2019.

•	Dividends declared totaled $0.12 per share during the quarter ended June 30, 2019 amounting to a total of $0.74 in dividends declared per share during the six months ended June 30, 2019.

Community Banking Segment

•	Pre-tax income of the segment totaled $7.4 million for the quarter ended June 30, 2019, which represents a 13.7% decrease compared to $8.5 million for the quarter ended June 30, 2018.

•	Net interest income of the segment totaled $13.5 million for the quarter ended June 30, 2019, which represents a 1.6% decrease compared to $13.7 million for the quarter ended June 30, 2018.

•

Average loans held for investment totaled $1.38 billion during the quarter ended June 30, 2019, which represents an increase of $47.3 million, or 3.6% over the comparable quarter in the prior year. Average loans held for investment decreased $228,000, or 0.1% annualized, compared to $1.38 billion for the quarter ended March 31, 2019.

•

Net interest margin decreased 32 basis points to 2.82% for the quarter ended June 30, 2019 compared to 3.14% for the quarter ended June 30, 2018, which was a result of the increase in cost of funding as certificates of deposit and borrowings repriced at higher rates over the past year. Net interest margin decreased nine basis points compared to 2.93% for the quarter ended March 31, 2019.

•

The segment had no provision for loan losses for the quarter ended June 30, 2019 compared to a negative provision for loan loss of $250,000 for the quarter ended June 30, 2018. Net recoveries totaled $26,000 for the quarter ended June 30, 2019, compared to net recoveries of $154,000 for the quarter ended June 30, 2018.

•	Noninterest income decreased $58,000 for the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018 as fees earned on loans decreased.

•	Noninterest expenses increased $647,000 for the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018 as compensation, occupancy, data processing, and real estate owned increased.

•	The efficiency ratio for the community banking segment totaled 49.52% for the quarter ended June 30, 2019, compared to 44.26% for the quarter ended June 30, 2018.

•	Average deposits totaled $1.04 billion during the quarter ended June 30, 2019, which represents an increase of $50.7 million, or 5.1%, over the comparable quarter in the prior year. Average deposits increased $4.3 million, or 1.6% annualized, compared to the quarter ended March 31, 2019.

•	Nonperforming assets as percentage of total assets was 0.37% at June 30, 2019, 0.44% at March 31, 2019, and 0.45% at June 30, 2018.

•	Past due loans as percentage of total loans was 0.61% at June 30, 2019, 0.46% at March 31, 2019, and 0.54% at June 30, 2018.

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Mortgage Banking Segment

•	The Mortgage Banking segment totaled a pre-tax income of $5.4 million for the quarter ended June 30, 2019, compared to $4.0 million of pre-tax income for the quarter ended June 30, 2018.

•

Loan originations increased approximately $72.1 million to $793.3 million during the quarter ended June 30, 2019, compared to $721.2 million during the quarter ended June 30, 2018. Origination volume relative to purchase activity accounted for 87.6% of originations for the quarter ended June 30, 2019 compared to 92.6% of total originations for the quarter ended June 30, 2018.

•

Mortgage banking income increased $1.8 million, or 5.6%, to $34.4 million for the quarter ended June 30, 2019, compared to $32.5 million for the quarter ended June 30, 2018.
Gross margin on loans sold decreased 4.7% to 4.29% for the quarter ended June 30, 2019, compared to 4.50% for the quarter ended June 30, 2018.

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, Brookfield, Fox Point/North Shore, Franklin/Hales Corners, Germantown/Menomonee Falls, Greenfield, Oak Creek, Oconomowoc/Lake Country, Pewaukee, Waukesha/Brookfield, and West Allis, Wisconsin and a commercial lending office in Minneapolis, Minnesota. WaterStone Bank is the parent company to Waterstone Mortgage, which has the ability to lend in 47 states. For more information about WaterStone Bank, go to http://www.wsbonline.com.

Forward-Looking Statements

This press release contains 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.” Such statements are subject to important factors that could cause actual results to differ materially from those anticipated by the forward-looking statements. These factors include (i) exposure to the deterioration in the commercial and residential real estate markets which could result in increased charge-offs and increases in the allowance for loan losses, (ii) various other factors, including changes in economic conditions affecting borrowers, new information regarding outstanding loans and identification of additional problem loans, which could require an increase in the allowance for loan losses, (iii) Waterstone’s ability to maintain required levels of capital and other current and future regulatory requirements, (iv) the impact of recent and future legislative initiatives on the financial markets, and (v) those 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.

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WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
	For The Three Months Ended June 30,					For The Six Months Ended June 30,
	2019		2018			2019			2018
	(In Thousands, except per share amounts)
Interest income:
Loans	$	18,026		16,700			35,130			32,158
Mortgage-related securities		764		644			1,523			1,282
Debt securities, federal funds sold and short-term investments		1,123		1,019			2,432			1,886
Total interest income		19,913		18,363			39,085			35,326
Interest expense:
Deposits		4,344		2,710			8,334			5,024
Borrowings		2,588		1,933			4,834			3,441
Total interest expense		6,932		4,643			13,168			8,465
Net interest income		12,981		13,720			25,917			26,861
Provision for loan losses		30		(220	)		(650	)		(1,100	)
Net interest income after provision for loan losses		12,951		13,940			26,567			27,961
Noninterest income:
Service charges on loans and deposits		390		491			769			890
Increase in cash surrender value of life insurance		507		473			851			801
Mortgage banking income		34,105		32,090			57,464			56,277
Other		188		264			363			533
Total noninterest income		35,190		33,318			59,447			58,501
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		27,074		26,234			47,713			47,217
Occupancy, office furniture, and equipment		2,680		2,605			5,456			5,244
Advertising		963		1,000			1,921			1,860
Data processing		869		623			1,638			1,248
Communications		353		435			681			817
Professional fees		789		647			1,484			1,347
Real estate owned		19		(126	)		51			191
Loan processing expense		879		904			1,684			1,892
Other		1,729		2,415			4,076			5,068
Total noninterest expenses		35,355		34,737			64,704			64,884
Income before income taxes		12,786		12,521			21,310			21,578
Income tax expense		3,143		3,101			5,125			5,205
Net income	$	9,643		9,420			16,185			16,373
Income per share:
Basic	$	0.37		0.34			0.61			0.60
Diluted	$	0.37		0.34			0.61			0.59
Weighted average shares outstanding:
Basic		26,242		27,504			26,370			27,506
Diluted		26,412		27,742			26,572			27,790

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WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
	June 30,			December 31,
	2019			2018
	(Unaudited)
Assets	(In Thousands, except per share amounts)
Cash	$	47,253		$	48,234
Federal funds sold		13,339			25,100
Interest-earning deposits in other financial institutions and other short term investments		9,553			12,767
Cash and cash equivalents		70,145			86,101
Securities available for sale (at fair value)		182,862			185,720
Loans held for sale (at fair value)		244,052			141,616
Loans receivable		1,370,727			1,379,148
Less: Allowance for loan losses		12,617			13,249
Loans receivable, net		1,358,110			1,365,899

Office properties and equipment, net		24,978			24,524
Federal Home Loan Bank stock (at cost)		22,275			19,350
Cash surrender value of life insurance		68,581			67,550
Real estate owned, net		1,684			2,152
Prepaid expenses and other assets		42,451			22,469
Total assets	$	2,015,138		$	1,915,381

Liabilities and Shareholders' Equity
Liabilities:
Demand deposits	$	127,123		$	139,111
Money market and savings deposits		182,222			163,511
Time deposits		745,651			735,873
Total deposits		1,054,996			1,038,495

Borrowings		518,681			435,046
Advance payments by borrowers for taxes		18,852			4,371
Other liabilities		35,806			37,790
Total liabilities		1,628,335			1,515,702

Shareholders' equity:
Preferred stock		-			-
Common stock		276			285
Additional paid-in capital		331,600			330,327
Retained earnings		183,820			187,153
Unearned ESOP shares		(17,210	)		(17,804	)
Accumulated other comprehensive loss, net of taxes		655			(2,361	)
Cost of shares repurchased		(112,338	)		(97,921	)
Total shareholders' equity		386,803			399,679
Total liabilities and shareholders' equity	$	2,015,138		$	1,915,381

Share Information
Shares outstanding		27,626			28,463
Book value per share	$	14.00		$	14.04
Closing market price	$	17.06		$	16.76
Price to book ratio		121.86	%		119.37	%

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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,
	2019			2019			2018			2018			2018
	(Dollars in Thousands, except per share amounts)
Condensed Results of Operations:
Net interest income	$	12,981			12,936			13,466			13,850			13,720
Provision for loan losses		30			(680	)		-			40			(220	)
Total noninterest income		35,190			24,257			25,636			34,062			33,318
Total noninterest expense		35,355			29,349			31,846			36,426			34,737
Income before income taxes		12,786			8,524			7,256			11,446			12,521
Income tax expense		3,143			1,982			1,578			2,743			3,101
Net income	$	9,643			6,542			5,678			8,703			9,420
Income per share – basic	$	0.37			0.25			0.21			0.32			0.34
Income per share – diluted	$	0.37			0.24			0.21			0.31			0.34
Dividends declared per share	$	0.12			0.62			0.12			0.12			0.12

Performance Ratios:
Return on average assets - QTD		1.95	%		1.39	%		1.18	%		1.80	%		2.02	%
Return on average equity - QTD		9.96	%		6.65	%		5.58	%		8.48	%		9.40	%
Net interest margin - QTD		2.82	%		2.93	%		2.99	%		3.07	%		3.14	%

Return on average assets - YTD		1.67	%		1.39	%		1.64	%		1.80	%		1.80	%
Return on average equity - YTD		8.28	%		6.65	%		7.60	%		8.25	%		8.13	%
Net interest margin - YTD		2.88	%		2.93	%		3.09	%		3.13	%		3.16	%

Asset Quality Ratios:
Past due loans to total loans		0.61	%		0.46	%		0.50	%		0.67	%		0.54	%
Nonaccrual loans to total loans		0.41	%		0.49	%		0.48	%		0.48	%		0.46	%
Nonperforming assets to total assets		0.37	%		0.44	%		0.45	%		0.45	%		0.45	%

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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,
	2019			2019			2018			2018			2018
Average balances	(Dollars in Thousands)
Interest-earning assets
Loans receivable and held for sale		1,552,199			1,477,991			1,496,125			1,507,632			1,451,507
Mortgage related securities		114,537			115,674			111,004			106,047			109,879
Debt securities, federal funds sold and short term investments		180,111			194,669			179,232			176,733			192,422
Total interest-earning assets		1,846,847			1,788,334			1,786,361			1,790,412			1,753,808
Noninterest-earning assets		136,263			125,396			119,715			122,575			119,291
Total assets		1,983,110			1,913,730			1,906,076			1,912,987			1,873,099

Interest-bearing liabilities
Demand accounts		35,744			36,268			36,941			37,936			37,291
Money market and savings accounts		193,542			176,237			184,873			185,864			166,587
Certificates of deposit		736,798			735,471			722,774			707,970			707,758
Total interest-bearing deposits		966,084			947,976			944,588			931,770			911,636
Borrowings		504,940			438,905			439,601			444,570			445,064
Total interest-bearing liabilities		1,471,024			1,386,881			1,384,189			1,376,340			1,356,700
Noninterest-bearing demand deposits		91,545			97,951			97,677			100,804			96,108
Noninterest-bearing liabilities		32,143			30,027			20,219			28,632			18,266
Total liabilities		1,594,712			1,514,859			1,502,085			1,505,776			1,471,074
Equity		388,398			398,871			403,991			407,211			402,025
Total liabilities and equity		1,983,110			1,913,730			1,906,076			1,912,987			1,873,099

Average Yield/Costs
Loans receivable and held for sale		4.66	%		4.69	%		4.63	%		4.56	%		4.61	%
Mortgage related securities		2.68	%		2.66	%		2.58	%		2.41	%		2.35	%
Debt securities, federal funds sold and short term investments		2.50	%		2.73	%		2.52	%		2.39	%		2.12	%
Total interest-earning assets		4.32	%		4.35	%		4.29	%		4.22	%		4.20	%

Demand accounts		0.09	%		0.09	%		0.09	%		0.10	%		0.09	%
Money market and savings accounts		0.66	%		0.63	%		0.47	%		0.35	%		0.30	%
Certificates of deposit		2.19	%		2.04	%		1.82	%		1.62	%		1.46	%
Total interest-bearing deposits		1.80	%		1.71	%		1.49	%		1.30	%		1.19	%
Borrowings		2.06	%		2.08	%		2.10	%		1.90	%		1.74	%
Total interest-bearing liabilities		1.89	%		1.82	%		1.68	%		1.50	%		1.37	%

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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,
	2019			2019			2018			2018			2018
	(Dollars in Thousands)
Condensed Results of Operations:
Net interest income	$	13,530			13,132			13,774			14,121			13,747
Provision for loan losses		-			(700	)		-			-			(250	)
Total noninterest income		1,079			881			911			1,312			1,137
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		4,671			4,756			4,761			4,435			4,301
Occupancy, office furniture and equipment		944			972			842			826			813
Advertising		220			181			185			183			241
Data processing		493			457			422			414			400
Communications		93			82			92			112			121
Professional fees		160			268			339			257			180
Real estate owned		19			32			(62	)		(128	)		(126	)
Loan processing expense		-			-			-			-			-
Other		635			489			571			701			658
Total noninterest expense		7,235			7,237			7,150			6,800			6,588
Income before income taxes		7,374			7,476			7,535			8,633			8,546
Income tax expense		1,594			1,687			1,632			2,003			1,970
Net income	$	5,780			5,789			5,903			6,630			6,576

Efficiency ratio - QTD		49.52	%		51.64	%		48.69	%		44.06	%		44.26	%
Efficiency ratio - YTD		50.56	%		51.64	%		47.63	%		47.28	%		48.99	%

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

	Waterstone Financial, Inc.


Date: July 24, 2019	/s/ Mark R. Gerke
	Name: Mark R. Gerke
	Title: Chief Financial Officer

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,
	2019			2019			2018			2018			2018
	(Dollars in Thousands)
Condensed Results of Operations:
Net interest income	$	(529	)		(208	)		(332	)		(286	)		(40	)
Provision for loan losses		30			20			-			40			30
Total noninterest income		34,364			23,571			24,986			33,165			32,547
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		22,579			16,060			18,499			23,164			22,078
Occupancy, office furniture and equipment		1,736			1,804			2,018			1,925			1,792
Advertising		743			777			854			1,041			759
Data processing		372			308			309			386			224
Communications		260			246			290			300			314
Professional fees		620			426			52			319			458
Real estate owned		-			-			-			-			-
Loan processing expense		879			805			643			837			904
Other		1,186			1,912			2,297			2,064			1,964
Total noninterest expense		28,375			22,338			24,962			30,036			28,493
Income before income taxes		5,430			1,005			(308	)		2,803			3,984
Income tax expense		1,545			286			(62	)		737			1,133
Net income	$	3,885			719			(246	)		2,066			2,851

Efficiency ratio - QTD		83.86	%		95.61	%		101.25	%		91.35	%		87.65	%
Efficiency ratio - YTD		88.66	%		95.61	%		92.89	%		90.60	%		90.16	%

Loan Originations	$	793,254			501,432			600,156			761,206			721,184
Purchase		87.6	%		89.9	%		91.1	%		92.1	%		92.6	%
Refiance		12.4	%		10.1	%		8.9	%		7.9	%		7.4	%
Gross margin on loans sold⁽¹⁾		4.29	%		4.57	%		4.17	%		4.39	%		4.50	%
(1) - Gross margin on loans sold equals mortgage banking income (excluding the change in interest rate lock value) divided by total loan originations