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Waterstone Financial Inc. Reports Operating Results (10-Q)

August 03, 2012 | About:
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10qk

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Waterstone Financial Inc. (WSBF) filed Quarterly Report for the period ended 2012-06-30.

Waterstone Financial, Inc. has a market cap of $115.7 million; its shares were traded at around $3.64 with and P/S ratio of 0.9.

Highlight of Business Operations:

Mortgage banking segment assets (which consist predominantly of loans held for sale) increased $37.2 million, or 37.1%, to $137.4 million as of June 30, 2012 compared to $100.2 million as of December 31, 2011. Additional details are provided in the "Loans Held for Sale" section. Mortgage banking segment revenues increased $21.1 million, or 133.9%, to $36.8 million for the six months ended June 30, 2012 compared to $15.7 million during the six months ended June 30, 2011. The $21.1 million increase in mortgage banking revenues was attributable to both an increase in loan origination volume, as well as increased margins. Loans originated for sale on the secondary market totaled $767.1 million during the six months ended June 30, 2012, which represents a $363.8 million, or 90.2%, increase in originations from the six months ended June 30, 2011, which totaled $403.3 million. In addition to the increase in revenues resulting from the increase in origination volume, mortgage banking revenues increased due to an increase in average sales margin. The increase in average sales margin was driven by an increase in pricing on all products in all geographic markets. The major components of mortgage banking revenues include fees and premiums associated with the sale of residential loans held for sale, which are discussed in section "Mortgage Banking Income." The major expenses for the mortgage banking segment are compensation, payroll taxes and other employee benefits, as well as occupancy, office furniture and equipment and other expenses, which are covered generally in the consolidated discussion in section "Noninterest Expense."

Noninterest Income - Total noninterest income increased $21.3 million, or 125.4%, to $38.3 million during the six months ended June 30, 2012 from $17.0 million during the comparable period in 2011. The increase resulted from an increase in mortgage banking income. Mortgage banking income increased $21.3 million, or 137.7%, to $36.7 million for the six months ended June 30, 2012, compared to $15.4 million during the comparable period in 2011. The $21.3 million increase in mortgage banking income was the result of an increase in origination and sales volumes as well as an increase in average sales margins. The increase in average sales margin reflects an increase in pricing and fees on all products in all geographic markets. Despite the increase in pricing, overall loan origination volumes increased significantly compared to the prior year which reflects the continued strong demand for fixed-rate loans due in large part to historically low interest rates on these products. Loans originated for sale on the secondary market totaled $767.1 million during the six months ended June 30, 2012, which represents a $363.8 million, or 90.2%, increase in originations from the six months ended June 30, 2011, which totaled $403.3 million. Our overall margin can be affected by the mix of both loan type (conventional loans versus governmental) and loan purpose (purchase versus refinance). During the six months ended June 30, 2012, the growth in loan origination volume resulted in a shift towards lower yielding conventional loans and loans made for the purpose of a refinancing, however, margins increased for all loan types and loan purpose, compared to the six months ended June 30, 2011. Loans originated for the purpose of a residential property purchase, which generally yields a higher margin than loans originated for the purpose of a refinance, comprised 60% of total originations during the six months ended June 30, 2012, compared to 67% during the six months ended June 30, 2011. The mix of loan type also changed slightly with conventional loans and governmental loans comprising 65% and 35% of all loan originations, respectively during the six months ended June 30, 2012. During the six months ended June 30, 2011 conventional loans and governmental loans comprised 58% and 42% of all loan originations, respectively.

Mortgage banking segment assets (which consist predominantly of loans held for sale) increased $37.2 million, or 37.1%, to $137.4 million as of June 30, 2012 compared to $100.2 million as of December 31, 2011. Additional details are provided in the "Loans Held for Sale" section. Mortgage banking revenues increased $13.1 million, or 137.2%, to $22.6 million for the three months ended June 30, 2012 compared to $9.5 million during the three months ended June 30, 2011. The $13.1 million increase in mortgage banking revenues was attributable to both an increase in loan origination volume, as well as increased margins. Loans originated for sale on the secondary market totaled $440.2 million during the three months ended June 30, 2012, which represents a $219.9 million, or 99.8%, increase in originations from the three months ended June 30, 2011, which totaled $220.3 million. In addition to the increase in revenues resulting from the increase in origination volume, mortgage banking revenues increased due to an increase in average sales margin. The increase in average sales margin was driven by an increase in pricing on all products in all geographic markets. The major components of mortgage banking revenues include fees and premiums associated with the sale of residential loans held for sale, which are discussed in section "Mortgage Banking Income." The major expenses for the mortgage banking segment are compensation, payroll taxes and other employee benefits, as well as occupancy, office furniture and equipment and other expenses, which are covered generally in the consolidated discussion in section "Noninterest Expense."

Noninterest Income - Total noninterest income increased $13.1 million, or 128.5%, to $23.3 million during the three months ended June 30, 2012 from $10.2 million during the comparable period in 2011. The increase resulted primarily from an increase in mortgage banking income. Mortgage banking income increased $13.2 million, or 142.6%, to $22.5 million for the three months ended June 30, 2012, compared to $9.3 million during the comparable period in 2011. The $13.2 million increase in mortgage banking income was the result of an increase in origination and sales volumes as well as an increase in average sales margins. The increase in average sales margin reflects an increase in pricing and fees on all products in all geographic markets. Despite the increase in pricing, overall loan origination volumes increased significantly compared to the prior year which reflects the continued strong demand for fixed-rate loans due in large part to historically low interest rates on these products. Loans originated for sale on the secondary market totaled $440.2 million during the three months ended June 30, 2012, which represents a $219.9 million, or 99.8%, increase in originations from the three months ended June 30, 2011, which totaled $220.3 million. Our overall margin can be affected by the mix of both loan type (conventional loans versus governmental) and loan purpose (purchase versus refinance). During the three months ended June 30, 2012, the growth in loan origination volume resulted in a shift towards lower yielding conventional loans and loans made for the purpose of a refinancing, however, margins increased for all loan types and loan purpose, compared to the three months ended June 30, 2011. Loans originated for the purpose of a residential property purchase, which generally yields a higher margin than loans originated for the purpose of a refinance, comprised 64% of total originations during the three months ended June 30, 2012, compared to 78% during the three months ended June 30, 2011. The mix of loan type also changed slightly with conventional loans and governmental loans comprising 65% and 35% of all loan originations, respectively during the three months ended June 30, 2012. During the three months ended June 30, 2011 conventional loans and governmental loans comprised 54% and 46% of all loan originations, respectively.

Securities Available for Sale - Securities available for sale increased by $6.7 million, or 3.3%, to $213.2 million at June 30, 2012 from $206.5 million at December 31, 2011. This increase reflects a $56.4 million increase in mortgage backed securities and a $5.5 million increase in government sponsored enterprise issued collateralized mortgage obligations, partially offset by a $42.3 million decrease in government sponsored enterprise bonds and a $14.1 million decrease in municipal securities. During the six months ended June 30, 2012, the proceeds from maturities and calls of government sponsored enterprise securities and from the sale of municipal securities were reinvested in mortgage related securities deemed to provide a better risk-adjusted return. The Company sold $11.6 million in short-term municipal securities at a gain of $241,000 in order to capture the related value of the tax-exempt feature of the securities not otherwise realized due to the Company's taxable loss position. As of June 30, 2012, the Company holds two available for sale private label issue collateralized mortgage obligations with a total fair value of $18.1 million and an amortized cost of $18.4 million that were determined to be other than temporarily impaired. The $371,000 unrealized loss (before taxes) is included in other comprehensive income. During the six months ended June 30, 2012, $4,000 was recognized as additional other than temporary impairment with respect to one of the private label issue collateralized mortgage obligations which was charged against earnings. As of June 30, 2012, the Company also holds two municipal securities with a total fair value and amortized cost of $215,000 that were determined to be other than temporarily impaired. During the six months ended June 30, 2012, $100,000 was recognized as additional other than temporary impairment with respect to these municipal securities which was charged against earnings.

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