Waterstone Financial Inc (WSBF, Financial) released its earnings report for the quarter and nine months ended September 30, 2023, on October 24, 2023. The company reported a net income of $3.3 million, or $0.16 per diluted share for Q3 2023, compared to $5.3 million, or $0.25 per diluted share for Q3 2022. For the nine months ended September 30, 2023, the net income per diluted share was $0.46, down from $0.83 for the same period in 2022.
Performance and Challenges
WSBF's CEO, Douglas Gordon, stated that the company continues to navigate the challenges resulting from a rapid rise in interest rates and an inverted yield curve. The Community Banking Segment maintained strong asset quality metrics and achieved growth in both loans held for investment and deposits during the quarter. However, the Mortgage Banking segment's results were negatively impacted by a challenging industry as inventory, housing affordability, and escalating interest rates have slowed mortgage origination volumes and compressed margins.
Financial Highlights
WSBF's consolidated net income totaled $3.3 million for Q3 2023, compared to $5.3 million for Q3 2022. The consolidated return on average assets was 0.58% for Q3 2023, down from 1.08% for Q3 2022. The consolidated return on average equity also declined to 3.63% for Q3 2023 from 5.38% for Q3 2022. During Q3 2023, the company declared dividends totaling $0.15 per common share and repurchased approximately 516,000 shares at a cost of $6.7 million.
Community Banking Segment
The Community Banking Segment's pre-tax income totaled $5.7 million for Q3 2023, a decrease of 33.8% compared to Q3 2022. Net interest income for the segment decreased by 19.8% to $12.4 million for Q3 2023, compared to $15.5 million for Q3 2022. However, average loans held for investment increased by 24.1% to $1.63 billion during Q3 2023, primarily due to increases in single-family and multi-family mortgages.
Mortgage Banking Segment
The Mortgage Banking Segment reported a pre-tax loss of $2.1 million for Q3 2023, compared to a pre-tax loss of $1.8 million for Q3 2022. Loan originations decreased by 18.1% to $597.6 million during Q3 2023, compared to $729.9 million during Q3 2022. Mortgage banking non-interest income also decreased by 21.4% to $21.5 million for Q3 2023, compared to $27.3 million for Q3 2022.
Looking Ahead
Despite the challenges, WSBF continues to find efficiencies and is committed to delivering value to its shareholders. The company's ability to navigate the current economic environment will be crucial in determining its future performance.
