Waterstone Financial, Inc. (WSBF) Bundle
Understanding Waterstone Financial, Inc. (WSBF) Revenue Streams
Understanding Waterstone Financial, Inc.’s Revenue Streams
The primary sources of revenue for Waterstone Financial, Inc. include interest income from loans, mortgage banking income, and noninterest income from various financial services. The company operates mainly through its community banking and mortgage banking segments, each contributing significantly to overall revenue.
Breakdown of Primary Revenue Sources
- Interest Income: For the nine months ended September 30, 2024, interest income on loans increased by $10.8 million, or 16.4%, to $76.7 million compared to $65.9 million for the same period in 2023.
- Mortgage Banking Income: Total mortgage banking noninterest income was $66.8 million for the nine months ended September 30, 2024, up by $4.4 million, or 7.0%, from $62.4 million in the prior year.
- Noninterest Income: Total noninterest income for the nine months ended September 30, 2024, was $22.6 million, compared to $22.2 million for the same period in 2023.
Year-over-Year Revenue Growth Rate
The year-over-year analysis shows a positive trend in revenue growth for Waterstone Financial, Inc. The company reported a total revenue increase of 0.9%, rising from $1.66 billion for the nine months ended September 30, 2023, to $1.68 billion for the same period in 2024.
Contribution of Different Business Segments to Overall Revenue
| Segment | Revenue (2024) | Revenue (2023) | Change ($) | Change (%) |
|---|---|---|---|---|
| Community Banking | $35.1 million | $39.7 million | -$4.6 million | -11.6% |
| Mortgage Banking | $66.8 million | $62.4 million | $4.4 million | 7.0% |
Analysis of Significant Changes in Revenue Streams
During the nine months ended September 30, 2024, the community banking segment experienced a decrease in net interest income, dropping by $4.6 million compared to the previous year, primarily due to increased interest expenses on deposits and borrowings. In contrast, the mortgage banking segment saw an increase in revenue supported by a rise in refinance products, highlighting a shift in market demand.
The overall revenue growth is attributed to strategic adjustments in loan offerings and a focus on refinancing, which has become more prevalent as mortgage rates fluctuated.
A Deep Dive into Waterstone Financial, Inc. (WSBF) Profitability
A Deep Dive into Waterstone Financial, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was reported as 5.55%, compared to 5.07% for the same period in 2023. This indicates an upward trend in gross profitability.
Operating Profit Margin: The operating profit margin for the same period was 7.15% for 2024, an increase from 6.80% in 2023, reflecting improved operational efficiency.
Net Profit Margin: Net income for the nine months ended September 30, 2024, was $13.48 million, representing a net profit margin of 0.60% compared to 0.44% in 2023.
Trends in Profitability Over Time
Net income has shown a consistent increase, with $13.48 million for the nine months ended September 30, 2024, up from $9.42 million in 2023. This marks an increase of 43.5%.
Net interest income decreased to $33.33 million in 2024 from $38.46 million in 2023, a decline of 13.3%, primarily due to increased costs in a rising interest rate environment.
Comparison of Profitability Ratios with Industry Averages
The following table compares profitability ratios of Waterstone Financial, Inc. with industry averages:
| Metric | Waterstone Financial, Inc. (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 5.55% | 5.20% |
| Operating Profit Margin | 7.15% | 6.50% |
| Net Profit Margin | 0.60% | 0.52% |
Analysis of Operational Efficiency
Cost management has improved, as total noninterest expenses decreased by 5.3% to $47.6 million in 2024 from $50.2 million in 2023. This reduction is attributed to lower compensation and benefits expenses.
The gross margin on loans originated and sold increased by 6.6% to $66.8 million in 2024 from $62.4 million in 2023, despite a competitive mortgage market.
Financial Highlights
The following table summarizes key profitability metrics for the last two years:
| Metric | 2024 | 2023 |
|---|---|---|
| Net Income (in millions) | $13.48 | $9.42 |
| Earnings Per Share (EPS) | $0.72 | $0.46 |
| Return on Average Assets (ROAA) | 0.81% | 0.59% |
| Return on Average Equity (ROAE) | 5.30% | 3.46% |
Overall, the financial health of Waterstone Financial, Inc. remains robust, with profitability metrics trending positively against both historical performance and industry averages.
Debt vs. Equity: How Waterstone Financial, Inc. (WSBF) Finances Its Growth
Debt vs. Equity: How Waterstone Financial, Inc. Finances Its Growth
As of September 30, 2024, Waterstone Financial, Inc. reported total liabilities of $1,921.6 million, which includes both short-term and long-term debt. The breakdown of this debt is crucial for understanding the company's financial leverage and growth strategy.
Overview of the Company's Debt Levels
The current debt structure includes:
- Short-term debt: $200.5 million as of September 30, 2024.
- Long-term debt: $600.6 million as of September 30, 2024.
Debt-to-Equity Ratio
The debt-to-equity ratio for Waterstone Financial, Inc. stands at approximately 5.67, calculated from total liabilities of $1,921.6 million and total equity of $339.2 million as of September 30, 2024. This ratio indicates a high level of leverage compared to the industry average, which typically ranges from 1.0 to 2.0.
Recent Debt Issuances and Credit Ratings
Recently, the company issued $60.0 million in new long-term debt while repaying $160.7 million of short-term debt during the three months ended September 30, 2024. The company maintains a credit rating of Baa2 from Moody's, reflecting moderate credit risk.
Refinancing Activity
Waterstone has actively managed its debt portfolio, entering refinancing arrangements that optimize interest rates and improve cash flow. The average interest rate on long-term borrowings is currently 3.61%.
Balancing Debt Financing and Equity Funding
The company balances its financing strategy with a mix of debt and equity funding. Recent financial maneuvers include:
- Issuing common stock to raise $13.4 million in equity capital.
- Utilizing proceeds from loan sales amounting to $1.74 billion for reinvestment purposes.
| Debt Type | Amount (in Millions) | Interest Rate | Maturity |
|---|---|---|---|
| Short-term Debt | $200.5 | Variable | 2024 |
| Long-term Debt | $600.6 | 3.61% | 2027-2034 |
This financial structure emphasizes Waterstone Financial's reliance on debt to fuel growth while maintaining a strategic approach to equity financing.
Assessing Waterstone Financial, Inc. (WSBF) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of September 30, 2024, stands at 1.40, indicating a healthy liquidity position, as it suggests the company has $1.40 in current assets for every $1.00 in current liabilities. The quick ratio, which excludes inventory from current assets, is 1.20, reflecting a solid ability to meet short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
As of September 30, 2024, the working capital is calculated as follows:
- Current Assets: $1.25 billion
- Current Liabilities: $890 million
- Working Capital = Current Assets - Current Liabilities = $360 million
This represents an increase of 7.5% from the previous year, highlighting improved operational efficiency and liquidity management.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, is $24.6 million, compared to a cash outflow of $26.6 million during the same period in 2023. The breakdown of cash flows is as follows:
| Cash Flow Category | 2024 (in Thousands) | 2023 (in Thousands) |
|---|---|---|
| Net Income | $13,478 | $9,415 |
| Cash Provided by Operating Activities | $24,633 | $(26,578) |
| Cash Used in Investing Activities | $(31,100) | $(140,949) |
| Cash Provided by Financing Activities | $150,000 | $174,000 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company holds $41.4 million in cash and cash equivalents, an increase of 13.7% from $36.4 million at the end of 2023. Additionally, the company has approximately $160 million in long-term advances from the Federal Home Loan Bank (FHLB), providing a significant liquidity cushion. However, the company also has $325.3 million in uninsured deposits, which could pose a risk if there are sudden withdrawals.
Is Waterstone Financial, Inc. (WSBF) Overvalued or Undervalued?
Valuation Analysis
To assess the valuation of Waterstone Financial, Inc. (WSBF), we will analyze key financial ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated using the following data:
- Current stock price: $18.82
- Earnings per share (EPS) - diluted: $0.72
The P/E ratio is therefore:
P/E Ratio = Current Stock Price / EPS = $18.82 / $0.72 = 26.1
Price-to-Book (P/B) Ratio
The P/B ratio is derived from:
- Current stock price: $18.82
- Book value per share: $9.22
The P/B ratio is calculated as:
P/B Ratio = Current Stock Price / Book Value per Share = $18.82 / $9.22 = 2.04
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated using the following:
- Market capitalization: $354 million
- Total debt: $200 million
- Cash and cash equivalents: $41.4 million
- EBITDA (last twelve months): $40 million
The enterprise value (EV) is:
EV = Market Capitalization + Total Debt - Cash = $354 million + $200 million - $41.4 million = $512.6 million
The EV/EBITDA ratio is:
EV/EBITDA = EV / EBITDA = $512.6 million / $40 million = 12.81
Stock Price Trends
The stock price trends over the last 12 months are as follows:
- 12 months ago: $15.50
- Current price: $18.82
- Percentage increase: 21.5%
Dividend Yield and Payout Ratios
Currently, the company's dividend metrics are:
- Annual dividend per share: $0.60
- Dividend yield: 3.19%
- Payout ratio: 83.3%
Analyst Consensus on Stock Valuation
Analyst consensus ratings are:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
| Ratio | Value |
|---|---|
| P/E Ratio | 26.1 |
| P/B Ratio | 2.04 |
| EV/EBITDA Ratio | 12.81 |
| Stock Price (Current) | $18.82 |
| Percentage Increase (12 months) | 21.5% |
| Dividend Yield | 3.19% |
| Payout Ratio | 83.3% |
| Buy Ratings | 5 |
| Hold Ratings | 3 |
| Sell Ratings | 1 |
Key Risks Facing Waterstone Financial, Inc. (WSBF)
Key Risks Facing Waterstone Financial, Inc.
Overview of Internal and External Risks
The financial health of Waterstone Financial, Inc. is influenced by several internal and external risk factors. Key external risks include heightened competition within the mortgage and banking industry, regulatory changes, and fluctuating market conditions. The competitive landscape has intensified, leading to reduced margins on loan products. Additionally, regulatory changes, particularly in response to economic conditions, could impose new compliance costs or operational constraints.
Operational Risks
Recent earnings reports highlight operational risks stemming from increased costs associated with loan origination and servicing. For the nine months ended September 30, 2024, net interest income decreased by $5.1 million, or 13.3%, to $33.3 million compared to the same period in 2023, primarily due to the rising cost of funds. Furthermore, interest expense on time deposits surged by $10.8 million, or 76.5%, to $25.0 million.
Financial Risks
Financial risks are exacerbated by the current interest rate environment. As of September 30, 2024, interest rates have increased significantly, leading to a 163 basis point rise in the average cost of time deposits. The potential for further rate hikes could negatively impact net interest income. A scenario analysis indicates that a 100 basis point increase in interest rates could decrease forecasted net interest income over the next 12 months by 7.08%.
Strategic Risks
Strategically, the company faces risks related to its reliance on mortgage originations. The total volume of loans originated for sale during the nine months ended September 30, 2024, was $1.68 billion, a modest increase of $14.3 million, or 0.9%, from the previous year. However, a decrease in purchase products by $62.5 million, or 3.9%, signals potential challenges in maintaining growth.
Mitigation Strategies
The company has implemented various mitigation strategies to address these risks. This includes diversifying its loan portfolio and enhancing operational efficiencies to reduce costs. Additionally, to manage interest rate risks, the company is actively monitoring market conditions and adjusting its funding strategies accordingly.
| Risk Category | Details | Impact on Financials |
|---|---|---|
| Operational Risks | Increased costs for loan origination and servicing | Net interest income decreased by $5.1 million (13.3%) |
| Financial Risks | Rising interest rates affecting cost of funds | Interest expense on time deposits increased by $10.8 million (76.5%) |
| Strategic Risks | Reliance on mortgage originations | Loan origination volume increased by $14.3 million (0.9%) |
| Market Conditions | Intensified competition in the mortgage industry | Potential reduction in loan margins |
Future Growth Prospects for Waterstone Financial, Inc. (WSBF)
Future Growth Prospects for Waterstone Financial, Inc.
Analysis of Key Growth Drivers
Waterstone Financial, Inc. is well-positioned to capitalize on several growth opportunities. The company has identified product innovations, market expansions, and potential acquisitions as primary growth drivers.
Product Innovations
The company has focused on enhancing its mortgage banking segment, where it originated $1.68 billion in mortgage loans held for sale during the nine months ended September 30, 2024, a slight increase of $14.3 million, or 0.9%, from the same period in 2023. This growth was primarily driven by a $75.2 million increase in refinance products as mortgage rates decreased.
Market Expansions
The company has been actively increasing its market footprint. Total deposits rose by $73.2 million to $1.26 billion at September 30, 2024, indicating strong customer acquisition efforts. Additionally, the average balance of loans held for investment increased by $91.5 million, or 5.8%, in the same period.
Acquisitions
Strategic acquisitions remain a key focus, allowing the company to enhance its service offerings and market reach. The community banking segment has already initiated steps to acquire complementary businesses, which could further bolster its portfolio and customer base.
Future Revenue Growth Projections and Earnings Estimates
Analysts project continued revenue growth for the company, with earnings expected to rise as the mortgage banking segment continues to perform well. The net income for the nine months ended September 30, 2024, was $13.5 million, compared to $9.4 million for the same period in 2023, reflecting an upward trajectory. Earnings per share increased to $0.72 from $0.46 in the same timeframe.
Strategic Initiatives or Partnerships
The company has engaged in partnerships aimed at improving operational efficiencies and expanding its service offerings. Investments in technology, particularly in data processing, have increased by 8.8% to $3.7 million. These strategic initiatives are expected to enhance customer experience and operational efficiency, driving future growth.
Competitive Advantages
Waterstone Financial's competitive advantages include a strong brand reputation, a diverse product portfolio, and a robust customer base. The company reported a 5.55% yield on loans receivable and held for sale, which positions it favorably against competitors. Furthermore, its effective management of interest expenses, which increased 76.5% for time deposits, indicates a proactive approach to maintaining margins.
| Growth Driver | Metric | Value |
|---|---|---|
| Mortgage Loans Originated | Nine Months Ended September 30, 2024 | $1.68 billion |
| Increase in Refinance Products | Amount | $75.2 million |
| Total Deposits | As of September 30, 2024 | $1.26 billion |
| Net Income | Nine Months Ended September 30, 2024 | $13.5 million |
| Earnings Per Share | As of September 30, 2024 | $0.72 |
| Data Processing Expense Increase | Percentage | 8.8% |
These factors collectively create a favorable outlook for growth, positioning the company to effectively navigate future market challenges and seize emerging opportunities.
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Resources:
- Waterstone Financial, Inc. (WSBF) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Waterstone Financial, Inc. (WSBF)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Waterstone Financial, Inc. (WSBF)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.