Waterstone Financial, Inc. Announces Results Of Operations For The Quarter And Nine Months Ended September 30, 2017

WAUWATOSA, Wis., Oct. 24, 2017

"We continue to execute at a high level of profitability, despite a number of challenges faced by the mortgage banking industry," said Douglas Gordon, CEO of Waterstone Financial, Inc. "The third quarter performance reflects continued improvement from the community banking segment.  Driven by loan growth and a continued focus on expense management, the community banking segment achieved a record $7.5 million of pretax income for the quarter.  The mortgage banking segment third quarter pretax income decreased $2.5 million to $4.3 million from last year's total. The decline from last year's record profitability is driven by a number of industry-wide challenges, including: a decrease in demand for refinance products, housing inventory shortages and weather-related disruptions."

Highlights of the Quarter Ended September 30, 2017

Waterstone Financial, Inc. (Consolidated)

• Consolidated net income of Waterstone Financial, Inc. totaled $7.4 million for the quarter ended September 30, 2017, compared to $7.5 million for the quarter ended September 30, 2016.
• Consolidated net income of Waterstone Financial, Inc. totaled $22.8 million for the nine months ended September 30, 2017, compared to $19.1 million for the nine months ended September 30, 2016.
• Consolidated return on average assets totaled 1.56% for the quarter ended September 30, 2017 compared to 1.66% for the quarter ended September 30, 2016.
• Consolidated return on average assets totaled 1.70% for the nine months ended September 30, 2017 compared to 1.45% for the nine months ended September 30, 2016.
• Repurchased 72,700 shares through our buyback program at an average cost of $17.51 per share and declared a dividend of $0.12 per share during the quarter ended September 30, 2017.

Community Banking Segment

• Pre-tax income of the segment totaled $7.5 million for the quarter ended September 30, 2017, which represents a 19.5% increase compared to $6.2 million for the quarter ended September 30, 2016.
• Net interest income totaled $13.1 million for the quarter ended September 30, 2017, which represents a 16.7% increase compared to $11.2 million for the quarter ended September 30, 2016. The increase in net interest income, which was driven by loan growth and a decrease in borrowing costs, drove our net interest margin to 2.95% for the quarter ended September 30, 2017 compared to 2.70% for the quarter ended September 30, 2016.
• Average loans held for investment totaled $1.25 billion during the quarter ended September 30, 2017, which represents an increase of $120.3 million, or 10.7% over the comparable quarter in the prior year. Total loans increased $83.3 million, or 7.1%, to $1.26 billion at September 30, 2017 compared to $1.18 billion at December 31, 2016.
• Driven by margin expansion and continued cost control efforts, the efficiency ratio for the segment improved to 47.78% for the quarter ended September 30, 2017, compared to 50.85% for the quarter ended September 30, 2016.
• Nonperforming assets as percentage of total assets decreased to 0.62% as of September 30, 2017, compared to 0.71% at June 30, 2017 and 1.01% at September 30, 2016.

Mortgage Banking Segment

• Pre-tax income of the segment totaled $4.3 million for the quarter ended September 30, 2017, which represents a 36.3% decrease compared to $6.8 million for the quarter ended September 30, 2016.
• Loans originated for the purpose of sale in the secondary market decreased $48.0 million, or 6.8%, to $662.1 million during the quarter ended September 30, 2017, compared to $710.1 million for the quarter ended September 30, 2016. The decrease in originations was driven by a 46.5% decrease in the origination of loans made for the purpose of mortgage refinance. Driven by an expansion of our branch network, origination volumes of loans made for the purpose of residential purchases increased 3.1% compared to the comparative quarter in the prior year. Our origination efforts continue to be focused on loans made for the purpose of residential purchases, as opposed to mortgage refinance. Origination volume relative to purchase activity accounted for 89.6% of originations for the quarter ended September 30, 2017 compared to 81.7% of total originations for the quarter ended September 30, 2016.
• Gross margins on loans sold decreased approximately 1.5% during the quarter ended September 30, 2017, compared to the quarter ended September 30, 2016.

About Waterstone Financial, Inc.