Waterstone Mortgage Volume Decreases in 2Q21


Although the share of mortgages purchased increased by 20 percentage points in the second quarter over the prior year, Waterstone Mortgage reported lower net income in the segment.

Subsidiary Waterstone Financial of Wauwatosa, Wisconsin had $ 10.4 million in net income in the second quarter, up from $ 14 million in the first quarter and $ 16.8 million a year ago. Net income from mortgage lending peaked at $ 21.1 million in the fourth quarter of 2020.

Mortgages account for the bulk of the parent company’s net income. Waterstone Financial, which also operates a public bank, generated total net income of $ 17.9 million in the second quarter, up from $ 21.3 million in the first quarter and $ 20.9 million in the second quarter of 2020.

The mortgage division’s gross margin on loans sold in the second quarter was the lowest in five periods at 481 basis points. This is below 486 basis points in the first quarter and 545 basis points in the second quarter of 2020.

But when it comes to restructuring, Waterstone Mortgage is ahead of the competition. Purchase mortgages accounted for 75.4% of the $ 1.07 billion issued in the most recent period. In the first quarter of the total volume of $ 1.12 billion, 56.1% fell on loans to purchase. A year ago, purchases accounted for 55.5% of $ 1.14 billion.

Fannie Mae’s latest industry forecast says all lenders have 58% loans in Q2 were refinancing; in the first quarter it was 72%, and a year ago – 68%.

The decline in the total volume of Waterstone mortgages also differs from that of large banks such as Wells Fargo, Bank of America and JPMorgan Chase, which registered quarterly growth in mortgage production.

Waterstone Mortgage’s non-interest income fell to $ 50.5 million in the second quarter from $ 55 million in the first quarter and $ 64.2 million in the second quarter of 2020.

Meanwhile, non-interest expenses, which include compensation costs, were $ 36.1 million in the most recent period, slightly higher than $ 35.6 million in the first quarter, but down from $ 40.3 million a year earlier.

The compensation line was flat compared to the first quarter. Over the last period, it amounted to $ 29.17 million against $ 29.26 million in the previous quarter. In the second quarter of 2020, it amounted to $ 32.1 million. According to Waterstone, the change from the same period last year is a result of lower fees and wages for branch managers as a result of lower lending volumes, as well as lower profitability of branches due to lower gross margins.

Waterstone made no provision for loan losses in the second quarter, compared with $ 30 million in the first quarter and $ 175 million a year ago caused by the pandemic. The decision to cut its reserve “was caused both by a decrease in the number and volume of loans sold, and by the actual default activity as a result of the COVID-19 pandemic, which was lower than expected,” the company said.

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