Hot Stocks Buzz: Waterstone Financial, Inc. (NASDAQ:WSBF)

Waterstone Financial, Inc. (NASDAQ:WSBF), holding company for WaterStone Bank, reported net income of $3.10M, or $0.110 per diluted share for the quarter finished December 31, 2017 compared to $6.40M, or $0.230 per diluted share for the quarter finished December 31, 2016.

Net income for the year finished December 31, 2017 totaled $26.00M, or $0.930 per diluted share compared to $25.50M, or $0.930 per diluted share for the year finished December 31, 2016.

The 4th- quarter and year to date 2017 results of operations each include a $2.70M charge to income tax expense related to the Company’s deferred tax asset revaluation that resulted from recent legislation that reduced the corporate federal income tax rate.

Excluding the impact of this revaluation, net income per diluted share⁽¹⁾ for the quarter and year finished December 31, 2017 were $0.210 and $1.030, respectively.

“We achieved record pre-tax earnings in 2017 fueled by a 36.00% incline in the pre-tax earnings of our Community Banking segment,” said Douglas Gordon, CEO of Waterstone Financial, Inc. “Annual loan growth of 9.70%, combined with a 13.60% incline in our net interest margin drove the record profits.  Our Mortgage Banking segment, coming off record earnings in 2016, faced margin compression throughout 2017 as the lack of refinance business inclined price competition within the industry.  Mortgage Banking segment earnings were also hampered by the expense associated with 11.0 new branches opened since the 4th- quarter of 2016.  The strength of our consolidated earnings, and capital, gave us the ability to pay dividends totaling $0.980 per share to our shareholders throughout 2017”.

Highlights of the Quarter and Year Finished December 31, 2017:

Waterstone Financial, Inc. (Consolidated):

• Consolidated pre-tax income of Waterstone Financial, Inc. totaled $9.20M for the quarter finished December 31, 2017, compared to $10.60M for the quarter finished December 31, 2016.
• Consolidated pre-tax income of Waterstone Financial, Inc. totaled $44.40M for the year finished December 31, 2017, compared to $42.00M for the year finished December 31, 2016.
• Consolidated return on average assets totaled 0.670% for the quarter finished December 31, 2017 compared to 1.440% for the quarter finished December 31, 2016. Adjusted for the deferred tax revaluation, consolidated return on average assets⁽¹⁾ totaled 1.260% for the quarter finished December 31, 2017.  
• Consolidated return on average assets totaled 1.430% for the year finished December 31, 2017 compared to 1.450% for the year finished December 31, 2016. Adjusted for the deferred tax revaluation, consolidated return on average assets⁽¹⁾ totaled 1.580% for the year finished December 31, 2017.  
• Dividends declared and paid totaled $0.980 per share throughout the year finished December 31, 2017.

Community Banking Segment:

• Pre-tax income of the segment totaled $7.40M for the quarter finished December 31, 2017, which represents a 16.30% incline compared to $6.40M for the quarter finished December 31, 2016.
• Pre-tax income of the segment totaled $28.60M for the year finished December 31, 2017, which represents a 36.10% incline compared to $21.00M for the year finished December 31, 2016.
• Net interest income of the segment totaled $13.40M for the quarter finished December 31, 2017, which represents an 11.80% incline compared to $12.00M for the quarter finished December 31, 2016.
• The incline in net interest income, which was driven by loan growth along with a decrease in borrowing costs, drove our net interest margin to 3.080% for the quarter finished December 31, 2017 compared to 2.880% for the quarter finished December 31, 2016.
• Average loans held for investment totaled $1.27B throughout the quarter finished December 31, 2017, which represents an incline of $111.60M, or 9.60% over the comparable quarter in the prior year.
• Total loans held for investment inclined $30.70M, or 2.40%, to $1.290B at December 31, 2017 compared to $1.26B at September 30, 2017.
• Total deposits inclined $10.60M, or 1.10%, to $967.40M at December 31, 2017 compared to $956.80M at September 30, 2017.
• Driven by margin expansion and continued cost control efforts, the efficiency ratio for the segment improved to 48.40% for the quarter finished December 31, 2017, compared to 51.00% for the quarter finished December 31, 2016.
• Nonperforming assets as%age of total assets decline to 0.590% as of December 31, 2017, compared to 0.620% at September 30, 2017, and 0.890% at December 31, 2016.

Mortgage Banking Segment:

• Pre-tax income of the segment totaled $1.80M for the quarter finished December 31, 2017, which represents a 58.10% decrease compared to $4.30M for the quarter finished December 31, 2016.
• Pre-tax income of the segment totaled $15.80M for the year finished December 31, 2017, which represents a 24.20% decrease compared to $20.90M for the year finished December 31, 2016.
• Loans originated for the purpose of sale in the secondary market declined $45.50M, or 7.30%, to $577.00M throughout the quarter finished December 31, 2017, compared to $622.50M for the quarter finished December 31, 2016.
• The decrease in originations was driven by a 45.60% 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 inclined 6.30% 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 87.00% of originations for the quarter finished December 31, 2017, compared to 77.00% of total originations for the quarter finished December 31, 2016. Origination volume relative to purchase activity accounted for 89.00% and 83.00% of total originations for the year finished December 31, 2017, and 2016, respectively.
• Year to date origination volume inclined about 5.00% to $2.50B throughout 2017.
• Gross margins on loans sold decline about 3.00% throughout the quarter finished December 31, 2017, compared to the quarter finished December 31, 2016.