New Waterstone(WSBF) - 2019 Q1 - Quarterly Report

Financial Performance - Net income for the community banking segment remained stable at $5.8 million for both Q1 2019 and Q1 2018, while net interest income decreased by $172,000 to $13.1 million [169]. - The mortgage banking segment reported a net income of $719,000 for Q1 2019, down from $1.1 million in Q1 2018, with mortgage loan originations decreasing by $14.6 million, or 2.8% [172]. - Total mortgage banking noninterest income decreased by $1.2 million, or 4.7%, to $23.6 million in Q1 2019 compared to $24.7 million in Q1 2018 [172]. - The overall net interest margin decreased to 2.93% in Q1 2019 from 3.18% in Q1 2018, reflecting increased interest expenses [178]. - The annualized return on average assets decreased to 1.39% in Q1 2019 from 1.57% in Q1 2018 [175]. - The annualized return on average equity decreased to 6.65% in Q1 2019 from 6.90% in Q1 2018 [175]. Income and Expenses - Compensation, payroll taxes, and other employee benefits expense decreased by $181,000, or 1.1%, to $16.1 million in Q1 2019 compared to Q1 2018 [174]. - Total noninterest income decreased by $926,000, or 3.7%, to $24.3 million during the three months ended March 31, 2019, primarily due to a decrease in mortgage banking income [189]. - Total noninterest expenses decreased by $798,000, or 2.6%, to $29.3 million during the three months ended March 31, 2019 [191]. Loan Loss Provisions - The provision for loan losses was a negative provision of $700,000 in Q1 2019, compared to a negative provision of $900,000 in Q1 2018 [169]. - Provision for loan losses amounted to a negative provision of $680,000 for the three months ended March 31, 2019, compared to a negative provision of $880,000 for the same period in 2018 [187]. - The allowance for loan losses decreased by $688,000 to $12.6 million at March 31, 2019, reflecting a negative provision due to an improved risk profile [227]. - Net charge-offs for the three months ended March 31, 2019, were $8,000, or less than 0.01% of average loans annualized [228]. Asset and Liability Management - Total assets increased by $13.3 million, or 0.7%, to $1.93 billion at March 31, 2019, from $1.92 billion at December 31, 2018 [193]. - Cash and cash equivalents increased by $18.7 million, or 21.8%, to $104.8 million at March 31, 2019, compared to $86.1 million at December 31, 2018 [194]. - Total deposits decreased by $1.2 million to $1.04 billion at March 31, 2019, primarily due to a decrease in demand and time deposits [201]. - Total borrowings increased by $13.4 million to $448.5 million at March 31, 2019, with external short-term borrowings at the mortgage banking segment increasing [202]. - Shareholders' equity decreased by $15.2 million to $384.5 million at March 31, 2019, primarily due to dividend declarations and stock repurchases [205]. Loan Portfolio and Quality - The mix of loan types shifted, with conventional loans comprising 68.4% of total originations in Q1 2019, down from 69.1% in Q1 2018 [173]. - Total non-accrual loans increased by $243,000, or 3.7%, to $6.8 million as of March 31, 2019 [210]. - Total loans past due decreased by $656,000, or 9.4%, to $6.3 million at March 31, 2019, compared to $7.0 million at December 31, 2018 [221]. - The allowance for loan losses to non-accrual loans ratio at the end of the period was 184.77% [227]. Capital Management - WaterStone Bank exceeded all regulatory capital requirements and is considered "well capitalized" as of March 31, 2019 [247]. - The company repurchased 7,497,453 shares at an average price of $13.80, with authorization to purchase an additional 230,300 shares [246]. - Total contractual obligations amounted to $1,497.4 million, with demand deposits at $128.5 million and time deposits at $733.5 million [249]. Interest Rate Risk - Interest rate risk management strategies include emphasizing variable rate loans and shortening the expected average life of the investment portfolio [258]. - A 100 basis point increase in interest rates is projected to decrease net interest income by 0.65%, while a decrease of 100 basis points would increase it by 2.18% [262].