Waterstone Financial Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2020

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 001-36271

WATERSTONE FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Maryland	90-1026709
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

11200 W. Plank Court Wauwatosa, Wisconsin	53226
(Address of principal executive offices)	(Zip Code)

(414) 761-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.01 Par Value		WSBF		The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes T No □

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes T No □

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer □	Accelerated filer T	Non-accelerated filer □	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes □ No ☐

The number of shares outstanding of the issuer’s common stock, $0.01 par value per share, was 25,906,848 at August 5, 2020.

WATERSTONE FINANCIAL, INC.

10-Q INDEX

	Page No.

PART I. FINANCIAL INFORMATION

Item l. Financial Statements
Consolidated Statements of Financial Condition as of June 30, 2020 (unaudited) and December 31, 2019	3
Consolidated Statements of Income for the three and six months ended June 30, 2020 and 2019 (unaudited)	4
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2020 and 2019 (unaudited)	5
Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended June 30, 2020 and 2019 (unaudited)	6-7
Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 (unaudited)	8
Notes to Consolidated Financial Statements (unaudited)	9-38

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	39-59
Item 3. Quantitative and Qualitative Disclosures about Market Risk	60
Item 4. Controls and Procedures	61

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	61
Item 1A. Risk Factors Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information	61 61 61 62 62
Item 6. Exhibits	62
Signatures	62

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	(Unaudited)
	June 30, 2020			December 31, 2019
Assets	(Dollars In Thousands, except share and per share data)
Cash	$	63,636		$	52,814
Federal funds sold		11,992			12,704
Interest-earning deposits in other financial institutions and other short term investments		1,291			8,782
Cash and cash equivalents		76,919			74,300
Securities available for sale (at fair value)		164,112			178,476
Loans held for sale (at fair value)		383,389			220,123
Loans receivable		1,433,803			1,388,031
Less: Allowance for loan losses		17,734			12,387
Loans receivable, net		1,416,069			1,375,644

Office properties and equipment, net		24,183			25,028
Federal Home Loan Bank stock (at cost)		26,720			21,150
Cash surrender value of life insurance		70,718			69,665
Real estate owned, net		702			748
Prepaid expenses and other assets		54,761			31,213
Total assets	$	2,217,573		$	1,996,347

Liabilities and Shareholders’ Equity
Liabilities:
Demand deposits	$	171,016		$	130,063
Money market and savings deposits		247,233			197,942
Time deposits		739,417			739,771
Total deposits		1,157,666			1,067,776

Borrowings		599,102			483,562
Advance payments by borrowers for taxes		20,828			4,212
Other liabilities		54,358			47,111
Total liabilities		1,831,954			1,602,661

Shareholders’ equity:
Preferred stock (par value $0.01 per share)
Authorized - 50,000,000 shares at June 30, 2020 and at December 31, 2019, no shares issued		-			-
Common stock (par value $0.01 per share)
Authorized - 100,000,000 shares at June 30, 2020 and at December 31, 2019
Issued - 25,843,314 at June 30, 2020 and 27,148,411 at December 31, 2019
Outstanding - 25,843,314 at June 30, 2020 and 27,148,411 at December 31, 2019		258			271
Additional paid-in capital		192,762			211,997
Retained earnings		205,863			197,393
Unearned ESOP shares		(16,023	)		(16,617	)
Accumulated other comprehensive income, net of taxes		2,759			642
Total shareholders’ equity		385,619			393,686
Total liabilities and shareholders’ equity	$	2,217,573		$	1,996,347

See accompanying notes to unaudited consolidated financial statements.

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WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
	(In Thousands, except per share amounts)

Interest income:
Loans	$	18,493	$	18,026	$	36,180	$	35,130
Mortgage-related securities		670		764		1,372		1,523
Debt securities, federal funds sold and short-term investments		698		1,123		1,761		2,432
Total interest income		19,861		19,913		39,313		39,085
Interest expense:
Deposits		3,947		4,344		8,265		8,334
Borrowings		2,665		2,588		5,273		4,834
Total interest expense		6,612		6,932		13,538		13,168
Net interest income		13,249		12,981		25,775		25,917
Provision (credit) for loan losses		4,500		30		5,285		(650	)
Net interest income after provision for loan losses		8,749		12,951		20,490		26,567
Noninterest income:
Service charges on loans and deposits		2,231		390		2,712		769
Increase in cash surrender value of life insurance		520		507		873		851
Mortgage banking income		63,774		34,105		94,180		57,464
Other		379		188		603		363
Total noninterest income		66,904		35,190		98,368		59,447
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		36,889		27,074		61,290		47,713
Occupancy, office furniture, and equipment		2,534		2,680		5,275		5,456
Advertising		864		963		1,764		1,921
Data processing		1,095		869		2,101		1,638
Communications		317		353		655		681
Professional fees		1,077		789		2,909		1,484
Real estate owned		33		19		44		51
Loan processing expense		1,208		879		2,284		1,684
Other		3,672		1,729		6,575		4,076
Total noninterest expenses		47,689		35,355		82,897		64,704
Income before income taxes		27,964		12,786		35,961		21,310
Income tax expense		7,016		3,143		8,944		5,125
Net income	$	20,948	$	9,643	$	27,017	$	16,185
Income per share:
Basic	$	0.86	$	0.37	$	1.08	$	0.61
Diluted	$	0.85	$	0.37	$	1.08	$	0.61
Weighted average shares outstanding:
Basic		24,464		26,242		24,934		26,370
Diluted		24,513		26,412		25,071		26,572

See accompanying notes to unaudited consolidated financial statements.

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WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
	(In Thousands)
Net income	$	20,948	$	9,643	$	27,017	$	16,185

Other comprehensive income, net of tax:
Net unrealized holding gain on available for sale securities:
Net unrealized holding gain arising during the period, net of tax expense of $(476), ($562), $(795), ($1,127), respectively		1,267		1,506		2,117		3,016
Total other comprehensive income		1,267		1,506		2,117		3,016
Comprehensive income	$	22,215	$	11,149	$	29,134	$	19,201

See accompanying notes to unaudited consolidated financial statements.

- 5 -

WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

	Common Stock						Additional Paid-In Capital			Retained Earnings			Unearned ESOP Shares			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity
	Shares			Amount
For the six months ended June 30, 2020	(In Thousands, except per share amounts)
Balances at January 1, 2020		27,148		$	271		$	211,997		$	197,393		$	(16,617	)	$	642		$	393,686

Comprehensive income:
Net income		-			-			-			27,017			-			-			27,017
Other comprehensive income		-			-			-			-			-			2,117			2,117
Total comprehensive income																				29,134

ESOP shares committed to be released to Plan participants		-			-			228			-			594			-			822
Cash dividend declared, $0.74 per share		-			-			-			(18,547	)		-			-			(18,547	)
Stock compensation activity, net of tax		45			1			530			-			-			-			531
Stock compensation expense		-			-			389			-			-			-			389
Purchase of common stock returned to authorized but unissued		(1,350	)		(14	)		(20,382	)		-			-			-			(20,396	)
Balances at June 30, 2020		25,843		$	258		$	192,762		$	205,863		$	(16,023	)	$	2,759		$	385,619

For the six months ended June 30, 2019	(In Thousands, except per share amounts)
Balances at January 1, 2019		28,463		$	285		$	232,406		$	187,153		$	(17,804	)	$	(2,361	)	$	399,679

Comprehensive income:
Net income		-			-			-			16,185			-			-			16,185
Other comprehensive income		-			-			-			-			-			3,016			3,016
Total comprehensive income																				19,201

ESOP shares committed to be released to Plan participants		-			-			281			-			594			-			875
Cash dividend declared, $0.74 per share		-			-			-			(19,518	)		-			-			(19,518	)
Stock based compensation activity		31			-			394			-			-			-			394
Stock compensation expense		-			-			598			-			-			-			598
Purchase of common stock returned to authorized but unissued		(868	)		(9	)		(14,417	)		-			-			-			(14,426	)
Balances at June 30, 2019		27,626		$	276		$	219,262		$	183,820		$	(17,210	)	$	655		$	386,803

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	Common Stock						Additional Paid-In Capital			Retained Earnings			Unearned ESOP Shares			Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity
	Shares			Amount
For the three months ended June 30, 2020	(In Thousands, except per share amounts)
Balances at April 1, 2020		26,275		$	263		$	198,579		$	187,812		$	(16,320	)	$	1,492	$	371,826

Comprehensive income:
Net income		-			-			-			20,948			-			-		20,948
Other comprehensive income		-			-			-			-			-			1,267		1,267
Total comprehensive income																			22,215

ESOP shares committed to be released to Plan participants		-			-			76			-			297			-		373
Cash dividend declared, $0.12 per share		-			-			-			(2,897	)		-			-		(2,897	)
Stock compensation activity, net of tax		6			-			78			-			-			-		78
Stock compensation expense		-			-			175			-			-			-		175
Purchase of common stock returned to authorized but unissued		(438	)		(5	)		(6,146	)		-			-			-		(6,151	)
Balances at June 30, 2020		25,843		$	258		$	192,762		$	205,863		$	(16,023	)	$	2,759

Price	16.96	EPS	1
Shares	27	P/E	17
MCap	460	P/FCF	-7
Net Debt	450	EBIT	56
TEV	910	TEV/EBIT	16
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-08-06
10-Q	2020-03-31	Filed 2020-05-13
10-K	2019-12-31	Filed 2020-03-13
10-Q	2019-09-30	Filed 2019-11-01
10-Q	2019-06-30	Filed 2019-07-31
10-Q	2019-03-31	Filed 2019-05-03
10-K	2018-12-31	Filed 2019-03-06
10-Q	2018-09-30	Filed 2018-10-30
10-Q	2018-06-30	Filed 2018-07-31
10-Q	2018-03-31	Filed 2018-04-30
10-K	2017-12-31	Filed 2018-03-06
10-Q	2017-09-30	Filed 2017-10-27
10-Q	2017-06-30	Filed 2017-07-31
10-Q	2017-03-31	Filed 2017-05-01
10-K	2016-12-31	Filed 2017-03-03
10-Q	2016-09-30	Filed 2016-10-31
10-Q	2016-06-30	Filed 2016-07-29
10-Q	2016-03-31	Filed 2016-04-29
10-K	2015-12-31	Filed 2016-03-04
10-Q	2015-09-30	Filed 2015-10-30
10-Q	2015-06-30	Filed 2015-07-31
10-Q	2015-03-31	Filed 2015-05-01
10-K	2014-12-31	Filed 2015-03-06
10-Q	2014-09-30	Filed 2014-10-31
10-Q	2014-06-30	Filed 2014-08-01
10-Q	2014-03-31	Filed 2014-05-02
10-K	2013-12-31	Filed 2014-03-21
10-Q	2013-09-30	Filed 2013-12-20

8-K	2020-07-27	Earnings, Exhibits
8-K	2020-07-21	Other Events, Exhibits
8-K	2020-07-06	Regulation FD
8-K	2020-06-29	Officers, Exhibits
8-K	2020-06-16
8-K	2020-05-19
8-K	2020-05-12
8-K	2020-05-11
8-K	2020-04-28
8-K	2020-04-27
8-K	2020-03-24
8-K	2020-02-25
8-K	2020-01-30
8-K	2020-01-14
8-K	2019-12-18
8-K	2019-10-23
8-K	2019-09-17
8-K	2019-09-17
8-K	2019-08-27
8-K	2019-07-24
8-K	2019-06-18
8-K	2019-06-14
8-K	2019-05-30
8-K	2019-05-21
8-K	2019-04-23
8-K	2019-03-29
8-K	2019-03-26
8-K	2019-03-25
8-K	2019-03-25
8-K	2019-03-11
8-K	2019-01-30
8-K	2018-12-20
8-K	2018-11-08
8-K	2018-10-23
8-K	2018-09-25
8-K	2018-09-18
8-K	2018-09-14
8-K	2018-07-31
8-K	2018-07-24
8-K	2018-07-02
8-K	2018-06-19
8-K	2018-06-19
8-K	2018-05-15
8-K	2018-04-24
8-K	2018-04-03
8-K	2018-03-20
8-K	2018-03-02
8-K	2018-02-20
8-K	2018-01-30

EX-31.1	exhibit311.htm
EX-31.2	exhibit312.htm
EX-32.1	exhibit321.htm
EX-32.2	exhibit322.htm

WSBF 10Q Quarterly Report

Waterstone Financial Earnings 2020-06-30