Waterstone Financial reported record earnings for the second quarter as its mortgage banking unit produced an all-time high in origination volume.
The company reported second-quarter net income of $20.9 million, up from $6.1 million in the first quarter and $9.6 million one year prior. The mortgage banking segment contributed $16.8 million of that net income, compared with just under $2 million in the first quarter and $3.9 million in the second quarter of 2019.
“Our success this quarter exemplifies the synergies that exist between our community bank and its wholly owned independent mortgage subsidiary,” Douglas Gordon, CEO of Waterstone Financial, said in a press release. “The funding and capital provided by the bank, combined with the exceptional sales culture of the mortgage company, resulted in record quarterly earnings.”
Waterstone Mortgage reached a new quarterly record, with more than $1.1 billion in loan originations for approximately 5,000 homeowners, Gordon said. Purchases made up 55% of that volume, compared with the 28% share that Fannie Mae predicted for the industry in its latest forecast.
In the first quarter, Waterstone Mortgage originated $708.8 million, while in the second quarter last year it produced $793.3 million.
Mortgage banking noninterest income was $64.2 million for the second quarter, up from $34.4 million for the same period last year.
Gross margin on loans sold increased to 545 basis points compared with 408 bps for the first quarter and 429 bps for the quarter ended June 30, 2019.
Waterstone Financial took a $4.5 million provision for loan losses in the second quarter, driven by the uncertain environment created by the coronavirus.
Of that provision, $4.3 million is for the community banking segment and $175,000 from the mortgage business.
But compared with past quarters, the mortgage banking provision is significantly higher. It was $35,000 in the first quarter and $30 million for the second quarter of 2019.