Waterstone Financial set another record in 3Q, driven by mortgages

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For the second consecutive quarter, Waterstone Financial posted record earnings, which were once again driven by the strong mortgage originations market.

The company had third-quarter net income of $26.2 million, up from $20.9 million in the second quarter and $10.9 million in the third quarter of 2019.

Its Waterstone Mortgage subsidiary contributed $20.1 million of the third quarter total, up from $16.8 million in the second quarter and $4.1 million one year ago.

It was also a record quarter for originations at the company, with $1.3 billion in volume. Of that total, 64% came from purchases and 36% from refinancings, which bucks the industry trend. Across the industry, an estimated 48% of third-quarter mortgage originations were purchases and 52% were refinances, according to the Mortgage Bankers Association's analysis of the dollar volume of originations in the third quarter.

In the second quarter, Waterstone originated $1.14 billion, while in the third quarter of 2019, it did $851.3 million.

Its gross margin on loans sold was 5.44%, down one basis point from the second quarter. In the third quarter last year it was 4.3%.

Waterstone Financial was able to reduce its loan loss provision on a quarter-to-quarter basis, to $1 million from $4.5 million in the second quarter. Most of the third-quarter provision was assigned to its WaterStone Bank unit, which had an increase of loans on its watch list. But the provision for the mortgage banking segment returned to more normal levels in the third quarter, at just $25,000. In the second quarter, because of the pandemic, the provision was $175,000, while in the third quarter of 2019, it was $70,000.

Waterstone Mortgage had a third-quarter net interest loss of $58,000, which was an improvement over the second-quarter loss of $511,000 and third-quarter 2019 loss of $744,000.

The unit's noninterest income grew to $73.1 million from $64.2 million in the second quarter and $23.6 million one year ago.

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