8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported):	April 25, 2023

Waterstone Financial, Inc.

(Exact name of registrant as specified in its charter)

Maryland	001-36271	90-1026709
(State or other jurisdiction of<br> incorporation)	(Commission File<br> Number)	(I.R.S. Employer Identification No.)

11200 W Plank Ct, Wauwatosa, Wisconsin 53226

(Address of principal executive offices)

414-761-1000

Registrant’s telephone number, including area code:

Not Applicable

Former name or former address, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 Par Value	WSBF	The NASDAQ Stock Market, LLC

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities and Exchange Act of 1934.

☐	Emerging growth company
☐	If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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Item 2.02 Results of Operations and Financial Condition.

On April 25, 2023, Waterstone Financial, Inc. issued a press release announcing its financial results for the quarter ended March 31, 2023. A copy of the press release is being furnished to the Securities and Exchange Commission as Exhibit 99.1 attached to this report and incorporated by reference.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

Exhibit No.	Description
99.1	Press release of Waterstone Financial, Inc. issued April 25, 2023.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Waterstone Financial, Inc.
Date: April 25, 2023	/s/ Mark R. Gerke
	Name:    Mark R. Gerke
	Title:    Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release of Waterstone Financial, Inc. issued April 25, 2023.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

ex_490197.htm

Exhibit 99.1

Waterstone Financial, Inc. Announces Results of Operations for the Quarter Ended March 31, 2023.

WAUWATOSA, WI – 4/25/2023 – Waterstone Financial, Inc. (NASDAQ: WSBF), holding company for WaterStone Bank, reported net income of $2.2 million, or $0.10 per diluted share for the quarter ended March 31, 2023 compared to $5.3 million, or $0.23 per diluted share for the quarter ended March 31, 2022.

"The Community Banking segment achieved an 18% increase in year over year pre-tax income, while our Mortgage Banking segment, as well as the entire mortgage industry, continue to be challenged by higher mortgage rates and a nationwide housing inventory shortage,” said Douglas Gordon, Chief Executive Officer of Waterstone Financial, Inc. “Despite the mortgage industry headwinds, we will continue to position our mortgage segment to take advantage of future improvements in the industry.”

Highlights of the Quarter Ended March 31, 2023

Waterstone Financial, Inc. (Consolidated)

●	Consolidated net income of Waterstone Financial, Inc. totaled $2.2 million for the quarter ended March 31, 2023, compared to $5.3 million for the quarter ended March 31, 2022.
●	Consolidated return on average assets was 0.43% for the quarter ended March 31, 2023 compared to 1.00% for the quarter ended March 31, 2022.
●	Consolidated return on average equity was 2.35% for the quarter ended March 31, 2023 and 5.00% for the quarter ended March 31, 2022.
●	Dividends declared during the quarter ended March 31, 2023 totaled $0.20 per common share.
●	We repurchased approximately 373,000 shares at a cost of $5.8 million, or $15.65 per share, during the quarter ended March 31, 2023.
●	Nonperforming assets as percentage of total assets was 0.22% at March 31, 2023, 0.22% at December 31, 2022, and 0.34% at March 31, 2022.
●	Past due loans as percentage of total loans was 0.64% at March 31, 2023, 0.41% at December 31, 2022, and 0.53% at March 31, 2022.
●	Book value per share was $16.73 at March 31, 2023 and $16.71 at December 31, 2022.

Community Banking Segment

●	Pre-tax income totaled $6.4 million for the quarter ended March 31, 2023, which represents a $1.0 million, or 18.5%, increase compared to $5.4 million for the quarter ended March 31, 2022.
●	Net interest income totaled $14.0 million for the quarter ended March 31, 2023, which represents a $2.4 million, or 20.2%, increase compared to $11.7 million for the quarter ended March 31, 2022.
●	Average loans held for investment totaled $1.53 billion during the quarter ended March 31, 2023, which represents an increase of $326.6 million, or 27.1%, compared to $1.20 billion for the quarter ended March 31, 2022. The increase was primarily due to increases in the single-family and multi-family mortgages. Average loans held for investment increased $118.3 million compared to $1.41 billion for the quarter ended December 31, 2022. The increase was primarily due to increases in the single-family and multi-family mortgages.
●	The community banking segment purchased $27.4 million adjustable-rate loans that were originated by the mortgage banking segment during the quarter ended March 31, 2023.
●	Net interest margin increased 50 basis points to 2.88% for the quarter ended March 31, 2023 compared to 2.38% for the quarter ended March 31, 2022, which was a result of a decrease in the average balance of cash, as funds were utilized to fund loans held for investment, and purchase investment securities. In addition, yields increased on loans receivable, loans held for sale, mortgage related securities, debt securities, federal funds sold and short term investments category. Net interest margin decreased 41 basis points compared to 3.29% for the quarter ended December 31, 2022, driven by an increase in weighted average cost of deposits and borrowings as the federal funds rate increases resulted in increased funding rates.

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●	The segment had a negative provision for credit losses - loans of $96,000 for the quarter ended March 31, 2023 compared to a provision for credit losses - loans of $17,000 for the quarter ended March 31, 2022.  The current quarter decrease was primarily due to a decrease in loan loss rates. The provision for credit losses - unfunded commitments was $484,000 for the quarter ended March 31, 2023 compared to a negative provision for credit losses - unfunded commitments of $157,000 for the quarter ended March 31, 2022. The increase for the quarter ended March 31, 2023 was due primarily to three significant construction loans that have not funded.
●	The efficiency ratio, a non-GAAP ratio, was 54.53% for the quarter ended March 31, 2023, compared to 59.59% for the quarter ended March 31, 2022.
●	Average deposits (excluding escrow accounts) totaled $1.17 billion during the quarter ended March 31, 2023, a decrease of $56.9 million, or 4.6%, compared to $1.23 billion during the quarter ended March 31, 2022. Average deposits decreased $37.3 million, or 12.3% annualized, compared to the $1.21 billion for the quarter ended December 31, 2022.
●	Other noninterest expense increased $296,000 to $896,000 during the quarter ended March 31, 2023 compared to $600,000 during the quarter ended March 31, 2022. The increase was driven by fees paid to the mortgage banking segment for the purchase of single-family adjustable rate mortgage loans.  These fees totaled $383,000 during the quarter ended March 31, 2023 compared to $181,000 during the quarter ended March 31, 2022.

Mortgage Banking Segment

●	Pre-tax loss totaled $3.7 million for the quarter ended March 31, 2023, compared to $1.4 million of pre-tax income for the quarter ended March 31, 2022.
●	Loan originations decreased $265.8 million, or 37.5%, to $442.7 million during the quarter ended March 31, 2023, compared to $708.5 million during the quarter ended March 31, 2022. Origination volume relative to purchase activity accounted for 96.5% of originations for the quarter ended March 31, 2023 compared to 77.3% of total originations for the quarter ended March 31, 2022.
●	Mortgage banking non-interest income decreased $10.7 million, or 37.2%, to $18.0 million for the quarter ended March 31, 2023, compared to $28.6 million for the quarter ended March 31, 2022.
●	Gross margin on loans sold decreased to 3.78% for the quarter ended March 31, 2023, compared to 4.00% for the quarter ended March 31, 2022.
●	During the quarter ended March 31, 2023, the Company sold mortgage servicing rights related to $318.3 million in loans receivable and with a book value of $2.8 million for $3.4 million resulting in a gain on sale of $601,000. There was no comparable sale during the quarter ended March 31, 2022. As of March 31, 2023, the Company maintained servicing rights related to $116.6 million in loans previously sold to third parties.
●	Total compensation, payroll taxes and other employee benefits decreased $5.3 million, or 26.1%, to $15.1 million during the quarter ended March 31, 2023 compared to $20.4 million during the quarter ended March 31, 2022. The decrease primarily related to decreased commission expense and salary expense driven by decreased loan origination volume and reduced employee headcount.

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About Waterstone Financial, Inc.

Waterstone Financial, Inc. is the savings and loan holding company for WaterStone Bank. WaterStone Bank was established in 1921 and offers a full suite of personal and business banking products. The Bank has branches in Wauwatosa/State St, Brookfield, Fox Point/North Shore, Franklin/Hales Corners, Germantown/Menomonee Falls, Greenfield/Loomis Rd, Milwaukee/Oklahoma Ave, Oak Creek/27th St, Oak Creek/Howell Ave, Oconomowoc/Lake Country, Pewaukee, Waukesha, West Allis/Greenfield Ave, and West Allis/National Ave, Wisconsin. WaterStone Bank is the parent company to Waterstone Mortgage, which has the ability to lend in 48 states. For more information about WaterStone Bank, go to http://www.wsbonline.com**.**

Forward-Looking Statements

This press release contains statements or information that may constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements include, without limitation, statements regarding expected financial and operating activities and results that are preceded by, followed by, or that include words such as “may,” “expects,” “anticipates,” “estimates” or “believes.”  Any such statements are based upon current expectations that involve a number of risks and uncertainties and are subject to important factors that could cause actual results to differ materially from those anticipated by the forward-looking statements.  Factors that might cause such a difference include changes in interest rates; demand for products and services; the degree of competition by traditional and nontraditional competitors; changes in banking regulation or actions by bank regulators; changes in tax laws; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; changes in the national and local economies; and other factors, including risk factors referenced in Item 1A. Risk Factors in Waterstone’s most recent Annual Report on Form 10-K and as may be described from time to time in Waterstone’s subsequent SEC filings, which factors are incorporated herein by reference.  Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect only Waterstone’s belief as of the date of this press release.

Non-GAAP Financial Measures

Management uses non-GAAP financial information in its analysis of the Company's performance. Management believes that this non-GAAP measure provides a greater understanding of ongoing operations and enhance comparability of results of operations with prior periods. The Company’s management believes that investors may use this non-GAAP measure to analyze the Company's financial performance without the impact of unusual items or events that may obscure trends in the Company’s underlying performance. This non-GAAP data should be considered in addition to results prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP results.  Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in this measure and that different companies might calculate this measure differently.

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WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	For The Three Months Ended March 31,
	2023		2022
	(In Thousands, except per share amounts)
Interest income:
Loans	$	19,885	$	13,500
Mortgage-related securities		943		602
Debt securities, federal funds sold and short-term investments		1,062		928
Total interest income		21,890		15,030
Interest expense:
Deposits		4,088		779
Borrowings		4,007		2,387
Total interest expense		8,095		3,166
Net interest income		13,795		11,864
Provision (credit) for credit losses		460		(76	)
Net interest income after provision for loan losses		13,335		11,940
Noninterest income:
Service charges on loans and deposits		430		510
Increase in cash surrender value of life insurance		325		316
Mortgage banking income		16,770		28,275
Other		1,029		717
Total noninterest income		18,554		29,818
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		20,052		25,535
Occupancy, office furniture, and equipment		2,263		2,188
Advertising		889		905
Data processing		1,122		1,202
Communications		251		340
Professional fees		416		461
Real estate owned		1		5
Loan processing expense		1,018		1,431
Other		3,095		2,868
Total noninterest expenses		29,107		34,935
Income before income taxes		2,782		6,823
Income tax expense		627		1,532
Net income	$	2,155	$	5,291
Income per share:
Basic	$	0.10	$	0.23
Diluted	$	0.10	$	0.23
Weighted average shares outstanding:
Basic		20,890		23,132
Diluted		20,980		23,311

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WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	March 31,			December 31,
	2023			2022
	(Unaudited)					****
Assets	(In Thousands, except per share amounts)
Cash	$	45,922		$	33,700
Federal funds sold		8,010			10,683
Interest-earning deposits in other financial institutions and other short term investments		260			2,259
Cash and cash equivalents		54,192			46,642
Securities available for sale (at fair value)		200,440			196,588
Loans held for sale (at fair value)		161,325			131,188
Loans receivable		1,550,219			1,510,178
Less: Allowance for credit losses ("ACL") - loans		17,744			17,757
Loans receivable, net		1,532,475			1,492,421
Office properties and equipment, net		20,716			21,105
Federal Home Loan Bank stock (at cost)		23,873			17,357
Cash surrender value of life insurance		66,294			66,443
Real estate owned, net		145			145
Prepaid expenses and other assets		55,039			59,783
Total assets	$	2,114,499		$	2,031,672
Liabilities and Shareholders' Equity			****			****
Liabilities:
Demand deposits	$	205,930		$	230,596
Money market and savings deposits		301,089			326,145
Time deposits		675,866			642,271
Total deposits		1,182,885			1,199,012
Borrowings		501,696			386,784
Advance payments by borrowers for taxes		13,434			5,334
Other liabilities		50,677			70,056
Total liabilities		1,748,692			1,661,186
Shareholders' equity:
Preferred stock		-			-
Common stock		219			222
Additional paid-in capital		123,448			128,550
Retained earnings		272,269			274,246
Unearned ESOP shares		(12,760	)		(13,056	)
Accumulated other comprehensive loss, net of taxes		(17,369	)		(19,476	)
Total shareholders' equity		365,807			370,486
Total liabilities and shareholders' equity	$	2,114,499		$	2,031,672
Share Information			****			****
Shares outstanding		21,867			22,174
Book value per share	$	16.73		$	16.71

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WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES

SUMMARY OF KEY QUARTERLY FINANCIAL DATA

(Unaudited)

	At or For the Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2023			2022			2022			2022			2022
	(Dollars in Thousands, except per share amounts)
Condensed Results of Operations:			****			****			****			****			****
Net interest income	$	13,795		$	15,611		$	15,398		$	14,081		$	11,864
Provision (credit) for credit losses		460			664			332			48			(76	)
Total noninterest income		18,554			17,095			27,404			31,238			29,818
Total noninterest expense		29,107			31,384			35,694			35,050			34,935
Income before income taxes		2,782			658			6,776			10,221			6,823
Income tax (benefit) expense		627			(277	)		1,506			2,231			1,532
Net income	$	2,155		$	935		$	5,270		$	7,990		$	5,291
Income per share – basic	$	0.10		$	0.04		$	0.25		$	0.36		$	0.23
Income per share – diluted	$	0.10		$	0.04		$	0.25		$	0.36		$	0.23
Dividends declared per common share	$	0.20		$	0.20		$	0.20		$	0.20		$	0.20
Performance Ratios (annualized):			****			****			****			****			****
Return on average assets - QTD		0.43	%		0.19	%		1.08	%		1.61	%		1.00	%
Return on average equity - QTD		2.35	%		0.99	%		5.38	%		7.93	%		5.00	%
Net interest margin - QTD		2.88	%		3.29	%		3.34	%		3.02	%		2.38	%
Return on average assets - YTD		0.43	%		0.96	%		1.22	%		1.30	%		1.00	%
Return on average equity - YTD		2.35	%		4.91	%		6.09	%		6.42	%		5.00	%
Net interest margin - YTD		2.88	%		3.00	%		2.90	%		2.69	%		2.38	%
Asset Quality Ratios:			****			****			****			****			****
Past due loans to total loans		0.64	%		0.41	%		0.48	%		0.60	%		0.53	%
Nonaccrual loans to total loans		0.29	%		0.29	%		0.37	%		0.59	%		0.55	%
Nonperforming assets to total assets		0.22	%		0.22	%		0.27	%		0.39	%		0.34	%
Allowance for credit losses - loans to loans receivable		1.14	%		1.18	%		1.29	%		1.35	%		1.40	%

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WATERSTONE FINANCIAL, INC. AND SUBSIDIARIES

SUMMARY OF QUARTERLY AVERAGE BALANCES AND YIELD/COSTS

(Unaudited)

	At or For the Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2023			2022			2022			2022			2022
Average balances	(Dollars in Thousands)
Interest-earning assets
Loans receivable and held for sale	$	1,654,942		$	1,578,790		$	1,492,462		$	1,433,452		$	1,361,839
Mortgage related securities		170,218			170,209			172,807			168,000			138,863
Debt securities, federal funds sold and short term investments		115,962			130,973			162,211			269,823			519,116
Total interest-earning assets		1,941,122			1,879,972			1,827,480			1,871,275			2,019,818
Noninterest-earning assets		107,009			122,643			114,274			117,248			128,813
Total assets	$	2,048,131		$	2,002,615		$	1,941,754		$	1,988,523		$	2,148,631
Interest-bearing liabilities
Demand accounts	$	68,564		$	75,449		$	75,058		$	70,674		$	69,736
Money market, savings, and escrow accounts		322,220			349,820			398,643			412,321			404,413
Certificates of deposit		648,531			628,375			586,012			584,244			610,681
Total interest-bearing deposits		1,039,315			1,053,644			1,059,713			1,067,239			1,084,830
Borrowings		441,716			333,249			296,111			326,068			440,252
Total interest-bearing liabilities		1,481,031			1,386,893			1,355,824			1,393,307			1,525,082
Noninterest-bearing demand deposits		143,296			177,217			153,591			154,070			152,900
Noninterest-bearing liabilities		51,840			63,866			43,683			36,962			41,232
Total liabilities		1,676,167			1,627,976			1,553,098			1,584,339			1,719,214
Equity		371,964			374,639			388,656			404,184			429,417
Total liabilities and equity	$	2,048,131		$	2,002,615		$	1,941,754		$	1,988,523		$	2,148,631
Average Yield/Costs (annualized)			****			****			****			****			****
Loans receivable and held for sale		4.87	%		4.69	%		4.32	%		4.07	%		4.02	%
Mortgage related securities		2.25	%		2.13	%		2.07	%		1.96	%		1.76	%
Debt securities, federal funds sold and short term investments		3.71	%		3.35	%		2.41	%		1.56	%		0.72	%
Total interest-earning assets		4.57	%		4.36	%		3.93	%		3.52	%		3.02	%
Demand accounts		0.08	%		0.08	%		0.08	%		0.09	%		0.08	%
Money market and savings accounts		1.26	%		0.67	%		0.21	%		0.19	%		0.21	%
Certificates of deposit		1.92	%		1.10	%		0.51	%		0.37	%		0.37	%
Total interest-bearing deposits		1.60	%		0.89	%		0.37	%		0.28	%		0.29	%
Borrowings		3.68	%		3.23	%		2.34	%		1.95	%		2.20	%
Total interest-bearing liabilities		2.22	%		1.45	%		0.80	%		0.67	%		0.84	%

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COMMUNITY BANKING SEGMENT

SUMMARY OF KEY QUARTERLY FINANCIAL DATA

(Unaudited)

	At or For the Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2023			2022			2022			2022			2022
	(Dollars in Thousands)
Condensed Results of Operations:			****			****			****			****			****
Net interest income	$	14,008		$	15,737		$	15,507		$	13,710		$	11,652
Provision (credit) for credit losses		388			624			234			(41	)		(140	)
Total noninterest income		987			1,033			1,116			1,640			1,432
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		5,168			4,781			4,424			4,596			5,212
Occupancy, office furniture and equipment		1,031			877			955			876			937
Advertising		184			203			213			244			227
Data processing		601			551			539			531			608
Communications		78			92			108			63			94
Professional fees		218			153			123			118			114
Real estate owned		1			13			1			-			5
Loan processing expense		-			-			-			-			-
Other		896			2,468			1,477			1,006			600
Total noninterest expense		8,177			9,138			7,840			7,434			7,797
Income before income taxes		6,430			7,008			8,549			7,957			5,427
Income tax expense		1,600			1,308			1,983			1,658			1,167
Net income	$	4,830		$	5,700		$	6,566		$	6,299		$	4,260
Efficiency ratio - QTD (non-GAAP)		54.53	%		54.49	%		47.16	%		48.43	%		59.59	%
Efficiency ratio - YTD (non-GAAP)		54.53	%		52.10	%		51.20	%		53.57	%		59.59	%

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MORTGAGE BANKING SEGMENT

SUMMARY OF KEY QUARTERLY FINANCIAL DATA

(Unaudited)

	At or For the Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2023			2022			2022			2022			2022
	(Dollars in Thousands)
Condensed Results of Operations:			****			****			****			****			****
Net interest (loss) income	$	(282	)	$	(241	)	$	(155	)	$	370		$	183
Provision for credit losses		72			40			98			89			64
Total noninterest income		17,951			18,066			27,305			30,126			28,604
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		15,099			17,397			21,864			21,311			20,438
Occupancy, office furniture and equipment		1,232			1,289			1,341			1,180			1,251
Advertising		705			769			924			718			678
Data processing		516			490			543			613			588
Communications		173			197			194			195			246
Professional fees		188			453			265			222			338
Real estate owned		-			-			-			-			-
Loan processing expense		1,018			1,059			1,120			1,134			1,431
Other		2,403			2,584			2,571			2,733			2,309
Total noninterest expense		21,334			24,238			28,822			28,106			27,279
(Loss) income before income taxes		(3,737	)		(6,453	)		(1,770	)		2,301			1,444
Income tax (benefit) expense		(1,002	)		(1,602	)		(470	)		578			377
Net (loss) income	$	(2,735	)	$	(4,851	)	$	(1,300	)	$	1,723		$	1,067
Efficiency ratio - QTD (non-GAAP)		120.74	%		135.98	%		106.16	%		92.16	%		94.76	%
Efficiency ratio - YTD (non-GAAP)		120.74	%		104.02	%		97.42	%		93.42	%		94.76	%
Loan originations	$	442,710		$	546,628		$	729,897		$	778,760		$	708,463
Purchase		96.5	%		95.6	%		94.2	%		90.4	%		77.3	%
Refinance		3.5	%		4.4	%		5.8	%		9.6	%		22.7	%
Gross margin on loans sold^(1)^		3.78	%		3.41	%		3.70	%		3.85	%		4.00	%

^(1)^ Gross margin on loans sold equals mortgage banking income (excluding the change in interest rate lock value) divided by total loan originations