"The results this quarter reflect our continued efforts over the past year to improve efficiencies at the mortgage banking segment," said William Bruss, Waterstone Financial CEO, in a press release. "While our results have improved, we continue to face many challenges within the segment, as the mortgage banking industry continues to face unknown variables driven by consumer demand, affordable inventory and interest rates."

The Wauwatosa, Wisconsin-based bank, unlike its big bank counterparts, reported increased volume year-over-year. But Waterstone also had lower quarter-to-quarter growth at approximately 31%.

Origination volume during the period was the best for Waterstone Mortgage since the third quarter of 2022, when it produced just shy of $730 million.

During the quarter, Waterstone sold mortgage servicing rights with unpaid principal balance of $233.1 million and a book value of $2 million for $2.1 million resulting in a gain on sale of $152,000. It did not sell any MSRs in the year ago quarter.

Volume of $634.1 million topped the first quarter's $485.1 million and $623.3 million one year prior.

While purchases made up 92.7% of volume, the share of refinancings doubled on a year-over-year basis, to 7.3% from 3.6%.

The increase in refi activity is in line with recent reports from Optimal Blue that found the share of locks for both the cash-out and rate and term versions rose 11% and 39% respectively in June.

The Mortgage Bankers Association attributed June's loosening of credit to the addition of cash-out products.

Waterstone Financial is the parent company of WaterStone Bank SSB and the mortgage company is a subsidiary of the bank.

In the second quarter Waterstone Financial had net income of $5.7 million, up from $4 million in the prior period but down from $6.2 million a year ago.

"The community banking segment continues to deal with margin pressure, as short-term funding rates remain elevated due to the restrictive monetary policy of the Federal Reserve," Bruss said. "Throughout this challenging period, we have maintained a robust share repurchase program that continues to return strong value to shareholders through repurchase activity that is accretive to book value."