GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

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

November 02, 2012 | About:
10qk

10qk

18 followers
Waterstone Financial Inc. (WSBF) filed Quarterly Report for the period ended 2012-09-30.

Waterstone Financial, Inc. has a market cap of $161.8 million; its shares were traded at around $5.25 with a P/E ratio of 51.6 and P/S ratio of 1.3.

Highlight of Business Operations:

Mortgage banking segment assets (which consist predominantly of loans held for sale) increased $40.3 million, or 40.2%, to $140.5 million as of September 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 $35.3 million, or 124.3%, to $63.6 million for the nine months ended September 30, 2012 compared to $28.4 million during the nine months ended September 30, 2011. The $35.3 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 $1.2 billion during the nine months ended September 30, 2012, which represents a $555.6 million, or 80.6%, increase in originations from the nine months ended September 30, 2011, which totaled $689.5 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 the "Mortgage Banking Income" section. 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 the "Noninterest Expense" section.

Interest income from other interest earning assets (comprised of debt securities, federal funds sold and short-term investments) decreased $705,000, or 28.6%, to $1.8 million for the nine months ended September 30, 2012 compared to $2.5 million for the nine months ended September 30, 2011. Interest income decreased due to a decrease of $53.3 million, or 22.5%, in the average balance of other earning assets to $184.1 million during the nine months ended September 30, 2012 from $237.4 million during the comparable period in 2011. The decrease in interest income from other earning assets also reflects a 12 basis point decline in the average yield on other earning assets to 1.27% for the nine months ended September 30, 2012 from 1.39% for the comparable period in 2011. During the nine months ended September 30, 2012, the debt security portfolio decreased as a result of $64.0 million in maturities and $11.9 million in sales. The proceeds from maturities and sales of debt securities were reinvested in mortgage-related securities.

Real estate owned expense decreased $956,000, or 13.2%, to $6.3 million during the nine months ended September 30, 2012 from $7.2 million during the comparable period in 2011. Real estate owned expense includes the net operating costs related to the properties. In addition, it includes net gain or loss recognized upon the sale of foreclosed property, as well as write-downs recognized to maintain the properties at the lower of cost or estimated fair value. The decrease in real estate owned expense results from a decrease in net property management expense and an increase in net gains on the sales of properties, partially offset by an increase in write-downs of asset values. During the nine months ended September 30, 2012, net operating expense, which includes but is not limited to property taxes, maintenance and management fees, net of rental income decreased $2.3 million, or 53.9%, to $2.0 million from $4.3 million during the comparable period in 2011. The decrease in net operating expense compared to the prior period resulted from both an improvement in the operating results of income producing properties as well as a decrease in the number and average balance of properties owned. The average balance of real estate owned totaled $52.8 million for the nine months ended September 30, 2012 compared to $60.3 million for the nine months ended September 30, 2011. Net losses recognized on the sale or write-down of real estate owned totaled $4.3 million during the nine months ended September 30, 2012, compared to $2.9 million during the comparable period in 2011.

Mortgage banking segment assets (which consist predominantly of loans held for sale) increased $40.3 million, or 40.2%, to $140.5 million as of September 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 $14.2 million, or 112.4%, to $26.8 million for the three months ended September 30, 2012 compared to $12.6 million during the three months ended September 30, 2011. The $14.2 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 $477.9 million during the three months ended September 30, 2012, which represents a $191.8 million, or 67.0%, increase in originations from the three months ended September 30, 2011, which totaled $286.1 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."

Securities Available for Sale – Securities available for sale increased by $1.1 million, or 0.5%, to $207.6 million at September 30, 2012 from $206.5 million at December 31, 2011. This increase reflects a $65.9 million increase in mortgage backed securities, partially offset by a $53.8 million decrease in government sponsored enterprise bonds and a $11.9 million decrease in municipal securities. During the nine months ended September 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 December 31, 2011. As of September 30, 2012, the Company holds two available for sale private label issue collateralized mortgage obligations with a total fair value of $17.1 million and an amortized cost of $18.2 million that were determined to be other than temporarily impaired. The $1.1 unrealized loss (before taxes) is included in other comprehensive income (loss). During the nine months ended September 30, 2012, $113,000 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 September 30, 2012, the Company also holds two municipal securities with a total fair value of $236,000 and amortized cost of $215,000 that were determined to be other than temporarily impaired. During the nine months ended September 30, 2012, $100,000 was recognized as additional other than temporary impairment with respect to these municipal securities which was charged against earnings.

Read the The complete Report

About the author:

10qk
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 5.0/5 (2 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK