On July 25, 2024, Waterstone Financial Inc (WSBF, Financial) released its 8-K filing announcing the financial results for the quarter and six months ended June 30, 2024. Waterstone Financial Inc is a holding company operating through two segments: Community Banking and Mortgage Banking. The Community Banking segment provides consumer and business banking products and services, while the Mortgage Banking segment focuses on residential mortgage loans for sale in the secondary market.
Performance Overview
Waterstone Financial Inc reported a net income of $5.7 million, or $0.31 per diluted share, for Q2 2024, compared to $4.0 million, or $0.20 per diluted share, for Q2 2023. For the six months ended June 30, 2024, net income per diluted share was $0.47, up from $0.30 for the same period in 2023.
“The results this quarter reflect our continued efforts over the past year to improve efficiencies at the Mortgage Banking segment,” said William Bruss, Chief Executive Officer of Waterstone Financial Inc. “While our results have improved, we continue to face many challenges within the Mortgage Banking segment, as the mortgage banking industry continues to face unknown variables driven by consumer demand, affordable inventory, and interest rates. The Community Banking segment continues to deal with margin pressure, as short-term funding rates remain elevated due to the restrictive monetary policy of the Federal Reserve.”
Financial Achievements and Challenges
Waterstone Financial Inc's consolidated net income increased to $5.7 million for Q2 2024 from $4.0 million in Q2 2023. The return on average assets was 1.02%, up from 0.74%, and the return on average equity was 6.84%, up from 4.41% year-over-year. The company declared dividends of $0.15 per common share and repurchased approximately 481,000 shares at a cost of $5.8 million, which was accretive to book value per share by $0.13.
However, the Community Banking segment faced a decrease in pre-tax income to $5.1 million, down 20.5% from $6.4 million in Q2 2023. Net interest income also decreased by 15.1% to $11.2 million. The net interest margin fell to 2.01% from 2.47% due to increased funding rates driven by the Federal Reserve's monetary policy. Past due loans increased to 0.76% of total loans from 0.50% a year ago.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Net Income | $5.7 million | $4.0 million |
| Net Interest Income | $10.7 million | $12.7 million |
| Noninterest Income | $26.5 million | $23.5 million |
| Noninterest Expenses | $30.3 million | $30.9 million |
| Net Interest Margin | 2.01% | 2.47% |
Balance Sheet and Cash Flow Highlights
As of June 30, 2024, Waterstone Financial Inc reported total assets of $2.29 billion, up from $2.21 billion at the end of 2023. Loans receivable increased to $1.68 billion from $1.66 billion, while deposits grew to $1.22 billion from $1.19 billion. The book value per share rose to $17.20 from $16.94 at the end of 2023.
Segment Performance
The Mortgage Banking segment showed significant improvement with a pre-tax income of $2.0 million for Q2 2024, compared to a pre-tax loss of $1.4 million in Q2 2023. Loan originations increased by 1.7% to $634.1 million, and mortgage banking non-interest income rose by 8.9% to $25.1 million. The gross margin on loans sold improved to 3.93% from 3.73%.
In contrast, the Community Banking segment faced challenges with a decrease in net interest income and an increase in past due loans. The efficiency ratio increased to 62.37% from 55.81%, indicating higher operating expenses relative to income.
Overall, Waterstone Financial Inc's Q2 2024 performance reflects a mixed bag of achievements and challenges. While the Mortgage Banking segment has shown improvement, the Community Banking segment continues to face margin pressures and increased loan delinquencies. Investors and stakeholders will be keenly watching how the company navigates these challenges in the coming quarters.
Explore the complete 8-K earnings release (here) from Waterstone Financial Inc for further details.
