Waterstone Financial, Inc. Announces Results of Operations for the Quarter Ended March 31, 2017

WAUWATOSA, Wis., April 28, 2017 /PRNewswire/ -- Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income per diluted share of $0.24 for the quarter ended March 31, 2017, which represents a 71.4% increase compared to net income per diluted share of $0.14 for the quarter ended March 31, 2016. 

"We continued to build off of our strong 2016 performance in the first quarter of 2017 as both the Community Banking and Mortgage Banking segments achieved record 1^st quarter net income," said Douglas Gordon, CEO of Waterstone Financial, Inc. "We generated $6.6 million in consolidated net income, which represents a 70.2% increase over prior year comparable quarter. The Community Banking segment benefited from strong loan growth, a lower cost of funds and reduced provision for loan loss due to continued improvement in loan portfolio quality.  The Mortgage Banking segment achieved a total of $481.3 million in loan originations this quarter which was an increase of $110.1 million, or 29.7%, compared to last year."

Highlights of the Quarter Ended March 31, 2017

• Consolidated net income of Waterstone Financial, Inc. totaled $6.6 million for the quarter ended March 31, 2017, compared to $3.9 million for the quarter ended March 31, 2016.
• Consolidated return on average assets totaled 1.54% for the quarter ended March 31, 2017 compared to 0.90% for the quarter ended March 31, 2016.

Community Banking Segment Highlights

• Pre-tax income of the segment totaled $6.8 million for the quarter ended March 31, 2017, which represents an 86.4% increase compared to $3.7 million for the quarter ended March 31, 2016.
• Total loans increased $17.0 million, or 1.4%, to $1.19 billion at March 31, 2017 compared to $1.18 billion at December 31, 2016. 
• Total deposits decreased $3.4 million, or 0.4%, to $946.0 million at March 31, 2017 compared to $949.4 million at December 31, 2016.  The decrease in total deposits was driven by a $4.9 million, or 0.7%, decrease in time deposits and decline in money market and savings deposits of $2.5 million, or 1.5%.  These decreases were partially offset by an increase of $4.0 million, or 3.3%, in demand deposits.
• Provision for loan losses decreased $1.4 million to a negative provision of $1.3 million for the quarter ended March 31, 2017.  The negative provision reflects the continued improvement in loan quality metrics including: non–accrual loans, loans classified as substandard or watch and loans past due.   
• Interest expense on borrowings decreased $1.8 million to $2.1 million for the quarter ended March 31, 2017, compared to $3.9 million for the quarter ended March 31, 2016.  This decrease was primarily driven by a decrease in the average cost of borrowings that resulted from the maturity and replacement of fixed rate borrowings since the beginning of the prior year.  The average cost of borrowings totaled 2.43% during the quarter ended March 31, 2017, compared to 3.91% during the quarter ended March 31, 2016.  
• Real estate owned expense increased $267,000, to $411,000 for the quarter ended March 31, 2017, compared to $144,000 for the quarter ended March 31, 2016.  Real estate owned property write-downs increased $325,000 to $455,000 in the current year, facilitating a plan to liquidate certain aged properties.  
• The effective income tax rate amounted to 34.2% for the three months ended March 31, 2017 compared to 35.7% for the three months ended March 31, 2016.  During the three months ended March 31, 2017, the Company recognized a benefit of approximately $350,000 related to stock awards exercised within the current period as a result of adopting the new stock compensation accounting standard.   

Mortgage Banking Segment Highlights

• Pre-tax income of the segment totaled $3.1 million for the quarter ended March 31, 2017, which represents a 32.9% increase compared to $2.3 million for the quarter ended March 31, 2016.
• Loans originated for the purpose of sale in the secondary market increased $110.1 million, or 29.7%, to $481.3 million during the three months ended March 31, 2017, compared to $371.2 million for the three months ended March 31, 2016.  The increase in originations was driven by an increase in the origination of loans made for the purpose of residential purchases, which yield a higher margin than refinance loans, along with an increase in the origination of mortgage refinance products.  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 improved and accounted for 85.9% originations for the three months ended March 31, 2017 compared to 84.9% of total originations for the three months ended March 31, 2016. 
• Pre-tax income of the segment includes a $308,000 gain on the sale of mortgage servicing rights during the quarter ended March 31, 2017.  There was no such comparable transaction in the prior year.  

About Waterstone Financial, Inc.

Waterstone Financial, Inc. (NASDAQ: WSBF) 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 offers mortgage banking offices in 23 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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SOURCE Waterstone Financial, Inc.