Wauwatosa Holdings, Inc. Announces Results of Operations for the Periods Ended December 31, 2005.
WAUWATOSA, WI – 02/23/2006 – Wauwatosa Holdings, Inc. (NASDAQ: WAUW) reported results of operations for its quarter and six-month transition period ended December 31, 2005. For the quarter, Wauwatosa Holdings reported a net loss of $709,000 or $0.02 per share. Net income for the six months ended December 31, 2005 was $2.7 million. On November 15, 2005, Wauwatosa Holdings announced that it had changed its fiscal year-end from June 30 to December 31 effective December 31, 2005. Consequently, on or before March 31, 2006, Wauwatosa Holdings will file a transition report on Form 10-K for the transition period from July 1, 2005 through December 31, 2005.
Effective October 4, 2005, Wauwatosa Savings Bank completed its reorganization and subsequent initial public offering of common stock of Wauwatosa Holdings, Inc. Upon completion of the reorganization, Lamplighter Financial, MHC (a Wisconsin chartered mutual holding company) owns a majority of the outstanding shares of common stock of Wauwatosa Holdings, Inc. and Wauwatosa Holdings owns 100% of the common stock of Wauwatosa Savings Bank. The reorganization was the primary contributing factor to the net loss generated during the quarter ended December 31, 2005.
In connection with the reorganization, 556,442 shares of Wauwatosa Holdings, Inc. common stock valued at $5.6 million were contributed to the Waukesha County Community Foundation, Inc. Charitable contributions totaling $500,000 were accrued in prior periods and $5.1 million in expense was recognized by Wauwatosa Holdings in the quarter ended December 31, 2005. In addition, an Employee Stock Ownership Plan (ESOP) and related trust were established in connection with the issuance of common stock of Wauwatosa Holdings, Inc. During the quarter ended December 31, 2005, the ESOP Trust purchased 762,000 shares to be allocated to plan participants ratably over a 10-year period. As such, 76,200 shares valued at an average market price of $11.22 per share were allocated to plan participants on December 31, 2005 resulting in $854,000 of additional compensation expense in the quarter ended December 31, 2005. In connection with the establishment of the ESOP, the Board of Directors froze the Wauwatosa Savings Bank pension plan. Pension plan expense totaled $502,000 and $640,000 for the quarter and six months ended December 31, 2005, respectively, including a $370,000 expense in the quarter ended December 31, 2005 related to the planned termination of the plan in 2006.
Net interest income continues to increase on volume even as the interest rate spread continues to decline. Net interest income was up $871,000 or 8.6% for the three months ended December 31, 2005 as compared to the comparable three months in 2004. This compares to a 25% increase in average earning assets for the same period. The interest rate spread, however, continues to decline. It was 2.34% for the quarter ended December 31, 2005, as compared to 2.94% for the same quarter in 2004.
It is anticipated that the interest rate spread will continue to decline throughout 2006. As Wauwatosa Holdings is dependent upon net interest income for approximately 90% of its total income, a continued decline in the interest rate spread significantly limits the prospect for increased net income.
During 2006, Wauwatosa Holdings intends to continue executing its plan to expand the product and service lines that it currently offers. Wauwatosa Savings Bank recently acquired Waterstone Mortgage Corporation, a mortgage broker with offices located in Pewaukee, Madison, Lake Geneva and Sheboygan, Wisconsin, and Livonia, Michigan. Waterstone Mortgage expects to originate approximately 1,300 loans in 2006 and generate gross revenues of approximately $2.6 million. This acquisition will expand both the types of mortgage loan products offered and the geographical coverage for those products. All Waterstone Mortgage Corporation revenue is expected to be noninterest income. In addition, Wauwatosa Holdings intends to continue to expand its branch network. Along with providing a wider delivery channel for a broader array of products and services, the expanded branch network should enable Wauwatosa Holdings to add retail, transactional deposit accounts, thus reducing reliance on higher cost certificate of deposit accounts. Wauwatosa Holdings has plans to open two new retail branch offices in calendar 2006 with the first to be located in the City of Franklin, Wisconsin.
Wauwatosa Holdings had total assets of $1.5 billion at December 31, 2005. Its subsidiary bank, Wauwatosa Savings Bank, is a Wisconsin-chartered savings bank which was originally organized in 1921. Wauwatosa Savings Bank conducts business from six offices in Wauwatosa, Oak Creek, Oconomowoc, Pewaukee and Waukesha, Wisconsin.
Cautionary Statements
The discussions in this news release which are not historical statements contain forward-looking statements that involve risk and uncertainties. Statements which are not historical statements include those in the future tense or which use terms such as “believe,” “expect,” and “anticipate.” Wauwatosa Holdings, Inc. actual future results could differ in important and material ways from those discussed. Many factors could cause or contribute to such differences. These factors include changing interest rates and related yield curves, changes in demand for loans or other services, competition from other institutions, actual verses estimated loan loss experience, other general economic and political developments, plus factors discussed in our filings with the Securities and Exchange Commission.
1
WAUWATOSA HOLDINGS, INC. FINANCIAL HIGHLIGHTS
Three months ended
Six months ended
Years ended
December 31,
December 31,
June 30,
2005
2004
2005
2004
2005
2004
(Unaudited)
(Unaudited)
(dollars in thousands, except ratios and per share data)
Operations Data:
Net interest income
$
10,959
$
10,088
$
21,278
$
19,290
$
38,139
$
33,656
Provision for loan losses
826
245
1,035
363
1,238
860
Noninterest income
1,267
729
2,272
1,985
3,311
3,035
Noninterest expense
12,578
7,170
18,331
12,262
23,576
20,384
Income (loss) before income taxes
(1,178
)
3,402
4,184
8,650
16,635
15,447
Income tax expense (benefit)
(469
)
1,070
1,471
2,864
7,520
4,863
Net income (loss)
(709
)
2,332
2,713
5,786
9,116
10,584
Selected Financial Ratios:
Yield on earning assets
5.81
%
5.99
%
5.85
%
5.94
%
5.91
%
5.85
%
Cost of funds
3.47
3.06
3.42
3.05
3.17
3.15
Interest rate spread
2.34
2.94
2.43
2.89
2.74
2.70
Return on average assets
(.18)
0.71
0.36
0.89
0.70
0.90
Return on average equity
(1.39
)
7.13
3.22
8.30
7.12
8.88
Average equity to average assets
13.27
9.93
11.25
10.66
9.83
10.15
Non-interest expense to average assets
3.27
2.18
2.44
1.88
1.81
1.74
Allowance for loan losses to total loans outstanding
0.40
0.33
0.40
0.33
0.38
0.32
Per Share:
Basic earnings (loss) per share (1)
$
(0.02
)
Diluted earnings (loss) per share (1)
(0.02
)
Book value per share
7.02
Weighted average shares outstanding — diluted
33,135,424
Shares outstanding at December 31, 2005
33,038,385
(1) Loss per share is based on the net loss from the date of the stock conversion, October 5, 2005 and the weighted average shares outstanding from October 5, 2005 to December 31, 2005.
December 31,
June 30,
Percent
2005
2005
Change
(Unaudited)
(in thousands, except percentages)
Financial Condition:
Total assets
$
1,511,209
$
1,386,132
9.03
%
Loans receivable, net
1,300,768
1,213,561
7.19
Securities available for sale
121,955
83,991
45.20
Deposits
1,045,593
1,128,791
(7.37
)
Borrowings
201,212
93,162
115.98
Total equity
231,696
133,416
73.66
Allowance for loan losses
5,250
4,606
13.98
Non-performing assets
18,280
13,076
39.80
2
WAUWATOSA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended
Six months ended
December 31,
December 31,
Years ended June 30,
2005
2004
2005
2004
2005
2004
(Unaudited) (Unaudited)
(Unaudited) (Unaudited)
(dollars in thousands, except per share data)
Interest income:
Loans
$
19,599
$
17,770
$
38,516
$
34,272
$
69,775
$
61,530
Mortgage-related securities
913
562
1,389
1,206
2,283
3,264
Debt securities, federal funds sold and
short-term investments
974
605
2,131
1,102
2,149
1,294
Total interest income
21,486
18,937
42,036
36,580
74,207
66,088
Interest expense:
Deposits
8,975
8,094
18,296
15,960
33,285
30,324
Borrowings
1,552
755
2,462
1,330
2,783
2,108
Total interest expense
10,527
8,849
20,758
17,290
36,068
32,432
Net interest income
10,959
10,088
21,278
19,290
38,139
33,656
Provision for loan losses
826
245
1,035
363
1,238
860
Net interest income after provision for loan losses
10,133
9,843
20,243
18,927
36,901
32,796
Noninterest income:
Service charges on loans and deposits
629
576
940
929
1,217
1,144
Increase in cash surrender value of life insurance
151
211
587
424
642
1,007
Gain on sale of securities
—
—
—
—
12
47
Other
487
(58
)
745
632
1,440
837
Total noninterest income
1,267
729
2,272
1,985
3,311
3,035
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits
4,376
3,048
7,404
5,705
11,434
10,763
Occupancy, office furniture, and equipment
966
819
1,802
1,714
3,482
3,470
Advertising
353
233
764
536
1,128
1,024
Data processing
490
285
840
570
1,142
1,048
Charitable contributions
5,122
1,568
5,310
1,713
2,088
988
Communications expense
142
144
300
272
591
525
Professional Fees
409
159
529
230
627
386
Other
720
914
1,382
1,522
3,084
2,180
Total noninterest expenses
12,578
7,170
18,331
12,262
23,576
20,384
Income (loss) before income taxes
(1,178
)
3,402
4,184
8,650
16,636
15,447
Income tax expense (benefit)
(469
)
1,070
1,471
2,864
7,520
4,863
Net income (loss)
$
(709
)
$
2,332
$
2,713
$
5,786
$
9,116
$
10,584
Basic earnings (loss) per share
$
(0.02
)
n/a
n/a
n/a
n/a
n/a
Diluted earnings (loss) per share
$
(0.02
)
n/a
n/a
n/a
n/a
n/a
3
WAUWATOSA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31,
June 30,
2005
2005
2004
(dollars in thousands, except per share data)
Assets
(Unaudited)
Cash
$
8,761
$
10,107
$
11,116
Federal funds sold
5,388
8,779
7,975
Short term investments
2,349
1,581
301
Cash and cash equivalents
16,498
20,467
19,392
Securities available-for-sale (at fair value):
121,955
83,991
99,549
Loans receivable
1,306,018
1,218,167
1,066,972
Allowance for loan losses
5,250
4,606
3,378
Loans receivable, net
1,300,768
1,213,561
1,063,594
Office properties and equipment, net
25,022
24,018
15,894
Federal Home Loan Bank stock, at cost
14,406
14,097
13,322
Cash surrender value of life insurance
22,792
22,078
20,980
Prepaid expenses and other assets
9,768
7,920
7,353
Total assets
$
1,511,209
$
1,386,132
$
1,240,084
Liabilities and Shareholders’ Equity
Liabilities:
Demand deposits
$
82,290
$
100,861
$
99,182
Money market and savings deposits
33,565
27,117
28,475
Time deposits
929,738
1,000,813
907,931
Total deposits
1,045,593
1,128,791
1,035,588
Federal Home Loan Bank advances short-term
87,209
35,000
25,000
Federal Home Loan Bank advances long-term
114,003
58,162
35,000
Advance payments by borrowers for taxes
181
15,821
14,446
Other liabilities
32,527
14,942
7,252
Total liabilities
1,279,513
1,252,716
1,117,286
Shareholders’ equity:
Common Stock (par value — $.01;
337
-
-
(200,000,000 shares authorized;
33,723,759 shares issued;
33,038,385 share outstanding)
Additional Paid-In Capital
103,859
—
—
Net unrealized loss on securities
available-for-sale (net of taxes)
(1,571
)
(627
)
(2,129
)
Retained earnings, substantially restricted
136,756
134,043
124,927
Unearned ESOP shares
(7,685
)
—
—
Total shareholders’ equity
231,696
133,416
122,798
Total liabilities and
shareholders’ equity
$
1,511,209
$
1,386,132
$
1,240,084
4
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