New Waterstone(WSBF) - 2018 Q4 - Annual Report

Loan Portfolio - As of December 31, 2018, WaterStone Bank's loan portfolio comprised 35.5% one- to four-family residential loans, 43.3% multi-family residential loans, and 16.4% commercial real estate loans[37]. - Total loans reached $1,379.1 million, with a net loan amount of $1,365.9 million after accounting for an allowance for loan losses of $13.2 million[41]. - As of December 31, 2018, one- to four-family residential mortgage loans totaled $490.0 million, representing 35.5% of total loans[44]. - Multi-family loans amounted to $597.1 million, accounting for 43.3% of total loans at the same date[48]. - The total amount of commercial loans was $225.5 million, representing 16.4% of total loans[41]. - Outstanding home equity loans and lines of credit totaled $20.0 million, representing 1.5% of total loans outstanding[51]. - Construction and land loans amounted to $13.4 million, or 1.0% of total loans, with $66.3 million originated for investment during 2018, accounting for 17.2% of all loans originated for investment[52]. - Commercial real estate loans totaled $225.5 million, or 16.4% of total loans, with $58.2 million originated for investment during 2018, representing 15.1% of all loans originated for investment[57]. Loan Origination - Waterstone Financial's mortgage banking subsidiary, Waterstone Mortgage Corporation, originated approximately $2.51 billion in mortgage loans held for sale during the year ended December 31, 2018[25]. - Waterstone Mortgage Corporation originated $2.60 billion in mortgage loans held for sale during the year ended December 31, 2018, an increase of $52.2 million, or 2.0%, from the previous year[108]. - Total loans originated for investment in 2018 amounted to $385.1 million, compared to $315.2 million in 2017[63]. - Multi-family loans originated for investment during 2018 totaled $123.1 million, or 32.0% of all loans originated for investment[48]. Financial Performance - Total mortgage banking income decreased by $6.7 million, or 5.5%, to $115.4 million during the year ended December 31, 2018, compared to $122.1 million in 2017[109]. - The allowance for loan losses at the end of 2018 was $13.25 million, down from $14.08 million at the end of 2017, reflecting a provision (credit) for loan losses of $(1.06) million[99]. - The net charge-offs for the year ended December 31, 2018, were $(232,000), compared to $786,000 in 2017, indicating a significant reduction in charge-offs[99]. - The total charge-offs for the year ended December 31, 2018, were $84,000, significantly lower than $1.48 million in 2017[99]. Asset Quality - Total non-accrual loans increased by $487,000, or 8.0%, to $6.6 million as of December 31, 2018 compared to $6.1 million as of December 31, 2017[74]. - The ratio of non-accrual loans to total loans receivable was 0.48% at December 31, 2018, compared to 0.47% at December 31, 2017[74]. - Troubled debt restructurings totaled $6.7 million at December 31, 2018, compared to $5.1 million at December 31, 2017[80]. - Total non-performing assets amounted to $8.7 million as of December 31, 2018[74]. - Total loans past due increased by $1.1 million, or 18.8%, to $6.95 million at December 31, 2018, from $5.85 million at December 31, 2017[87]. Capital and Liquidity - As of December 31, 2018, WaterStone Bank had a capital to assets ratio of 20.01%, down from 21.44% in 2017[165]. - WaterStone Bank was classified as well-capitalized with a common equity Tier 1 ratio of 26.05% and a total risk-based capital ratio of 26.95%[177]. - The capital conservation buffer requirement was fully implemented at 2.5% on January 1, 2019, which is necessary for capital distributions and discretionary bonuses[170]. - WaterStone Bank's Required Liquidity Ratio was 8.0% as of December 31, 2018, and the bank was in compliance with this requirement[180]. Regulatory Environment - WaterStone Bank is subject to extensive regulation by the WDFI and the Federal Deposit Insurance Corporation, impacting its operational capabilities[140]. - The Dodd-Frank Act increased the minimum target Deposit Insurance Fund ratio to 1.35% of estimated insured deposits, which was exceeded in November 2018[161]. - Loans to one borrower are limited to 20% of the savings bank's capital plus an additional 5% for fully secured loans, with a maximum of $500,000 for certain purposes[149]. - The Federal Deposit Insurance Corporation has the authority to increase insurance assessments, which could adversely affect WaterStone Bank's operating expenses[162]. Investment Portfolio - Waterstone Financial's investment subsidiary, Wauwatosa Investments, Inc., manages the majority of the consolidated investment portfolio[27]. - The mortgage-backed securities portfolio had a weighted average yield of 2.58% and a weighted average remaining life of 4.2 years at December 31, 2018[116]. - Total securities available for sale amounted to $188.272 million as of December 31, 2018, with a weighted average yield of 2.63%[125]. - The municipal obligations portfolio totaled $55.9 million at December 31, 2018, with a weighted average yield of 2.37% and a weighted average remaining life of 5.2 years[118].