Exhibit 99.1
Waterstone Financial, Inc. Announces Results of Operations for the Quarter and the Six Months Ended June 30, 2014.
WAUWATOSA, WI – 8/1/2014 – Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income for the second quarter of 2014 of $3.8 million, compared to $1.9 million for the quarter ended March 31, 2014 and $4.9 million for the second quarter of 2013. Net income per diluted share was $0.11 for the second quarter of 2014 as compared to $0.14 per diluted share for the second quarter of 2013.
"Our community banking operations generated solid loan growth and increasing net income, however, our overall results continue to be impacted by the decline in originations and margins the mortgage industry is experiencing." stated Doug Gordon, President and Chief Executive Officer of the Company. "We continue to execute an organic growth strategy to further leverage the capital raised in the first quarter of 2014."
During the quarter, the community banking segment increased loans receivable before allowance for loan losses from $1.10 billion at March 31, 2014 to $1.12 billion at June 30, 2014. The community banking segment net income for the quarter ended June 30, 2014 totaled $2.8 million compared to $2.2 million for the second quarter of 2013. Community banking operations were positively impacted by a $950,000 decline in provision for loan losses from $1.2 million in the second quarter of 2013 to $250,000 in the second quarter of 2014 due to the improving credit quality metrics set forth below. Net income was also positively impacted by a $361,000 increase in net interest income to $10.1 million during the second quarter of 2014 compared to $9.7 million during the second quarter of 2013. The positive impact of the reduction in provision for loan losses and increase in net interest income was partially offset by an increase in real estate owned expense from $12,000 in the second quarter of 2013 to $705,000 in the second quarter of 2014. The mortgage banking segment reported net income of $1.0 million for the quarter ended June 30, 2014 compared to $2.6 million for the quarter ended June 30, 2013. The decrease in mortgage banking income was the result of a decrease in the volume of loans originated and sold as well as a decrease in the margins earned on loan sales in 2014 compared to 2013.
Credit quality continued its steady pace of improvement in the second quarter of 2014. Total nonperforming assets as a percentage of total assets remained consistent at 3.78% at both June 30, 2014 and December 31, 2013 and declined from 5.10% at June 30, 2013. Nonaccrual loans declined by 10% to $46.0 million at June 30, 2014 from $51.0 million at December 31, 2013 while real estate owned declined marginally to $22.1 million from $22.7 million during the same period. This equates to a decline in total nonperforming assets of 8% to $68.1 million at June 30, 2014 from $73.6 million at December 31, 2013. Nonaccrual loans declined by 14% to $46.0 million at June 30, 2014 from $53.3 million at June 30, 2013 while real estate owned declined by 26% to $22.1 million at June 30, 2014 from $30.0 million at June 30, 2013. This equates to a decline in total nonperforming assets of 18% to $68.1 million at June 30, 2014 from $83.2 million at June 30, 2013. Total delinquent loans declined by 28% to $43.9 million at June 30, 2014 from $60.6 million at June 30, 2013.
About Waterstone Financial, Inc.
Waterstone Financial, Inc. (NASDAQ: WSBF) is a single-bank, holding company headquartered in Wauwatosa, WI. With $1.80 billion in assets at June 30, 2014, Waterstone has nine community bank branches in the metropolitan Milwaukee market, a loan production office in Minneapolis, Minnesota, and mortgage banking offices in eighteen states around the country. Additional financial detail related to WaterStone Bank, SSB can be found on the FDIC web site (www.fdic.gov) under the "Industry Analysis" tab.
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 Annual Report on Form 10-K for the year ended December 31, 2013 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.
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(unaudited)
| | | 2014 | | | 2013 |
| | | | Q2 | | | | Q1 | | | | Q4 | | | | Q3 | | | | Q2 | |
Performance Ratios: | | (dollars in thousands) |
| Return on average assets | | | 0.85 | % | | | 0.42 | % | | | 0.46 | % | | | 0.79 | % | | | 1.21 | % |
| Return on average equity | | | 3.27 | % | | | 1.87 | % | | | 3.58 | % | | | 6.04 | % | | | 9.42 | % |
| Net interest margin | | | 2.53 | % | | | 2.31 | % | | | 2.43 | % | | | 2.51 | % | | | 2.60 | % |
| Efficiency ratio | | | 81.65 | % | | | 88.32 | % | | | 88.04 | % | | | 79.77 | % | | | 74.93 | % |
Condensed Income Data: | | | | | | | | | | | | | | | | | | | | |
| Net interest income | | $ | 10,610 | | | $ | 9,700 | | | $ | 9,561 | | | $ | 9,578 | | | $ | 9,921 | |
| Provision for loan losses | | | 285 | | | | 250 | | | | 572 | | | | 1,000 | | | | 1,200 | |
| Total noninterest income | | | 23,196 | | | | 17,058 | | | | 17,029 | | | | 21,030 | | | | 26,707 | |
| Total noninterest expense | | | 27,603 | | | | 23,632 | | | | 23,410 | | | | 24,416 | | | | 27,447 | |
| Income before income taxes | | | 5,918 | | | | 2,876 | | | | 2,608 | | | | 5,192 | | | | 7,981 | |
| Income tax expense | | | 2,148 | | | | 993 | | | | 671 | | | | 1,973 | | | | 3,054 | |
| Net income | | $ | 3,770 | | | $ | 1,883 | | | $ | 1,937 | | | $ | 3,219 | | | $ | 4,927 | |
Asset Quality Data: | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses | | $ | 21,227 | | | $ | 23,391 | | | $ | 24,264 | | | $ | 24,708 | | | $ | 27,767 | |
| Net charge-offs | | | 2,449 | | | | 1,123 | | | | 1,016 | | | | 4,059 | | | | 2,731 | |
| Total past due loans | | | 43,885 | | | | 42,440 | | | | 44,011 | | | | 48,881 | | | | 60,606 | |
| Real estate owned | | | 22,117 | | | | 22,543 | | | | 22,663 | | | | 23,147 | | | | 29,983 | |
Average Balance Sheet Data: | | | | | | | | | | | | | | | | | | | | |
| Total assets | | | 1,788,404 | | | | 1,806,023 | | | | 1,660,026 | | | | 1,610,910 | | | | 1,628,967 | |
| Loans receivable and held for sale | | | 1,229,046 | | | | 1,162,205 | | | | 1,165,624 | | | | 1,211,089 | | | | 1,235,782 | |
| Mortgage-related securities | | | 166,748 | | | | 125,871 | | | | 126,490 | | | | 126,447 | | | | 134,985 | |
| Total interest-earning assets | | | 1,680,225 | | | | 1,706,289 | | | | 1,557,874 | | | | 1,513,985 | | | | 1,530,723 | |
| Interest-bearing deposits | | | 807,831 | | | | 887,679 | | | | 916,248 | | | | 855,975 | | | | 871,565 | |
| Borrowings | | | 453,211 | | | | 444,823 | | | | 464,035 | | | | 485,488 | | | | 485,199 | |
| Total interest-bearing liabilities | | | 1,261,042 | | | | 1,332,502 | | | | 1,445,487 | | | | 1,341,463 | | | | 1,356,764 | |
| Total shareholders' equity | | | 461,965 | | | | 407,977 | | | | 214,539 | | | | 211,307 | | | | 209,699 | |
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WATERSTONE FINANCIAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| | | (Unaudited) June 30, | | | December 31, | |
| | | 2014 | | | 2013 | |
| ASSETS | | (in thousands) | |
| Cash and cash equivalents | | $ | 112,566 | | | $ | 429,169 | |
| Securities available for sale (at fair value) | | | 278,701 | | | | 213,418 | |
| Loans held for sale (at fair value) | | | 168,470 | | | | 97,021 | |
| Loans receivable, net of allowance for loan losses | | | 1,099,430 | | | | 1,068,412 | |
| Office properties and equipment | | | 26,936 | | | | 27,090 | |
| Federal Home Loan Bank stock (at cost) | | | 17,500 | | | | 17,500 | |
| Cash surrender value of life insurance | | | 50,010 | | | | 39,378 | |
| Real estate owned | | | 22,117 | | | | 22,663 | |
| Prepaid expenses and other assets | | | 26,662 | | | | 32,388 | |
| Total assets | | $ | 1,802,392 | | | $ | 1,947,039 | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | |
| Deposits | | $ | 848,638 | | | $ | 1,244,741 | |
| Borrowings | | | 454,686 | | | | 455,197 | |
| Advance payments by borrowers for taxes | | | 16,610 | | | | 2,482 | |
| Other liabilities | | | 24,449 | | | | 30,147 | |
| Total liabilities | | | 1,344,383 | | | | 1,732,567 | |
| Common stock and additional paid-in capital | | | 344 | | | | 341 | |
| Additional paid-in capital | | | 313,803 | | | | 110,480 | |
| Retained earnings | | | 153,409 | | | | 151,195 | |
| Unearned ESOP shares | | | (10,292 | ) | | | (854 | ) |
| Accumulated other comprehensive income, net of taxes | | | 745 | | | | (1,429 | ) |
| Treasury shares, at cost | | | - | | | | (45,261 | ) |
| Total shareholders' equity | | | 458,009 | | | | 214,472 | |
| Total liabilities and shareholders' equity | | $ | 1,802,392 | | | $ | 1,947,039 | |
WATERSTONE FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
| | | For the Three Months | | | For the Six Months | |
| | | Ended June 30, | | | Ended June 30, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
| | | (in thousands, except per share data) | |
| Interest income: | | | | | | | | | | | | |
| Loans | | $ | 14,568 | | | $ | 14,862 | | | $ | 28,236 | | | $ | 30,075 | |
| Mortgage-related securities | | | 748 | | | | 419 | | | | 1,307 | | | | 856 | |
| Debt securities and short-term investments | | | 825 | | | | 617 | | | | 1,651 | | | | 1,153 | |
| Total interest income | | | 16,141 | | | | 15,898 | | | | 31,194 | | | | 32,084 | |
| Interest expense: | | | | | | | | | | | | | | | | |
| Deposits | | | 1,125 | | | | 1,353 | | | | 2,185 | | | | 2,819 | |
| Borrowings | | | 4,406 | | | | 4,624 | | | | 8,699 | | | | 9,198 | |
| Total interest expense | | | 5,531 | | | | 5,977 | | | | 10,884 | | | | 12,017 | |
| Net interest income | | | 10,610 | | | | 9,921 | | | | 20,310 | | | | 20,067 | |
| Provision for loan losses | | | 285 | | | | 1,200 | | | | 535 | | | | 2,960 | |
| Net interest income after provision for loan losses | | | 10,325 | | | | 8,721 | | | | 19,775 | | | | 17,107 | |
| Noninterest income: | | | | | | | | | | | | | | | | |
| Mortgage banking income | | | 22,188 | | | | 25,455 | | | | 36,690 | | | | 47,443 | |
| Other | | | 1,008 | | | | 1,252 | | | | 3,565 | | | | 2,297 | |
| Total noninterest income | | | 23,196 | | | | 26,707 | | | | 40,255 | | | | 49,740 | |
| Noninterest expense: | | | | | | | | | | | | | | | | |
| Compensation and employee benefits | | | 18,190 | | | | 19,944 | | | | 33,249 | | | | 36,426 | |
| Occupancy, office furniture and equipment | | | 2,621 | | | | 1,862 | | | | 5,306 | | | | 3,778 | |
| Advertising | | | 838 | | | | 796 | | | | 1,574 | | | | 1,620 | |
| Real estate owned | | | 705 | | | | 12 | | | | 1,253 | | | | 153 | |
| FDIC insurance premiums | | | 304 | | | | 380 | | | | 710 | | | | 1,053 | |
| Other | | | 4,945 | | | | 4,453 | | | | 9,142 | | | | 8,288 | |
| Total noninterest expense | | | 27,603 | | | | 27,447 | | | | 51,234 | | | | 51,318 | |
| Income before income taxes | | | 5,918 | | | | 7,981 | | | | 8,796 | | | | 15,529 | |
| Income taxes | | | 2,148 | | | | 3,054 | | | | 3,142 | | | | 5,977 | |
| Net income | | $ | 3,770 | | | $ | 4,927 | | | $ | 5,654 | | | $ | 9,552 | |
| Income per share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.11 | | | $ | 0.14 | | | $ | 0.17 | | | $ | 0.28 | |
| Diluted | | | 0.11 | | | | 0.14 | | | | 0.16 | | | | 0.28 | |
