Business Context and Reporting Period
Company: Waterstone Financial, Inc. (WSBF)
Filing Type: Form 8-K (Current Report)
Date of Report: May 12, 2020
Reporting Period Affected: Quarter ended March 31, 2020
This filing addresses a non-reliance on previously issued interim financial statements for the quarter ended March 31, 2020, due to a subsequent event involving a legal arbitration award.
Key Financial Metrics and Adjustments
The filing details a restatement of financial results for the three months ended March 31, 2020, driven by a new loss reserve.
- Loss Reserve Recorded: Approximately $1.1 million (attorney fees and costs related to Herrington et al. v. Waterstone Mortgage Corporation).
- Revised Net Income: $6.1 million (reduced by approximately $802,000 from previously reported figures).
- Revised Diluted Earnings Per Share (EPS): $0.24 (reduced by $0.03 from previously reported figures).
The filing does not provide updated figures for revenue, cash flow, margins, debt, or liquidity; it focuses solely on the impact of the legal contingency on net income and EPS.
Material Changes Versus Prior Period
Relative to the earnings release filed on April 28, 2020:
- Net Income: Decreased by approximately $802,000.
- Diluted EPS: Decreased by $0.03.
- Cause: Recognition of a loss contingency following an arbitration award issued on May 6, 2020, which the Company determined met the criteria for recognition as of March 31, 2020.
Outlook, Risks, and Management Commentary
Legal Contingency: The Company was notified on May 6, 2020, of an award allowing the plaintiff to recover $1.1 million in attorney fees and costs. The Company retains the right to challenge this award in court via a motion to vacate or modify, and retains appellate rights even if a judgment is entered.
Management Action: The Audit Committee concluded that the previously issued financial statements should no longer be relied upon. The Company is assessing avenues for appeal but has recorded the loss reserve based on current accounting principles.
Future Filings: The Company intends to file its Form 10-Q for the period ended March 31, 2020, by May 15, 2020, which will include the revised financial statements reflecting this adjustment.
Investor Verification Checklist
- Verify the revised Net Income of $6.1 million and Diluted EPS of $0.24 in the upcoming Form 10-Q.
- Monitor the status of the Company's motion to vacate or modify the $1.1 million arbitration award.
- Review the notes to the consolidated financial statements in the Form 10-Q for detailed disclosure regarding the Herrington et al. lawsuit.
- Confirm the filing date of the Form 10-Q, expected by May 15, 2020.