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WSFS FINANCIAL CORPORATION
838 Market Street, Wilmington, DE 19899
For Release: October 21, 2003 Contact: Mark A. Turner
(302) 571-7160
WSFS ANNOUNCES 3Q `03 EPS of $0.66
WSFS Financial Corporation (NASDAQ/NMS: WSFS), the parent company of
Wilmington Savings Fund Society, FSB, reported quarterly net income of $5.3
million, or $0.66 per diluted share. This compares to net income of $9.5
million, or $1.00 per diluted share, for the third quarter of 2002. However,
earnings for the third quarter of 2002 included approximately $4.5 million, or
$0.47 per diluted share, from discontinued operations and business segments that
were later sold. As a result, income from continuing operations in the third
quarter of 2002 was $5.0 million, or $0.53 per diluted share.
Highlights for the third quarter include: (i) net growth in loans of
$60.4 million, or 5% over June 30, 2003 and $255.8 million, or 26% over
September 30, 2002, primarily concentrated in commercial loans; (ii) continued
improvement in asset quality with the ratio of nonperforming assets (NPA) to
total assets of only 33 basis points at September 30, 2003 compared to 41 basis
points at June 30, 2003 and 45 basis points at September 30, 2002, and (iii)
growth in core deposits (non-CD) of $17.8 million, or 3% over June 30, 2003 and
$78.5 million, or 14% over September 30, 2002.
The following is a brief discussion of the third quarter 2003 results
from continuing operations.
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Net Interest Income
Net interest income for the third quarter of 2003 was $13.4 million.
This compares to $14.1 million for the same quarter in 2002; however, the third
quarter of 2002 included $2.0 million in interest income from reverse mortgages.
Substantially all of WSFS' reverse mortgages were sold in the fourth quarter of
2002 at a significant gain. Net interest income was $14.6 million for the second
quarter of 2003. The net interest margin percentage of 2.96% for the third
quarter of 2003 declined from 3.34% for the second quarter of 2003. For the
third quarter, the net interest margin was negatively impacted by the yield on
the Bank's mortgage-backed securities ("MBS") portfolio. The yield on the MBS
portfolio was 2.11% in the third quarter of 2003 versus 3.06% in the second
quarter of 2003. The decline in the yield on MBS alone resulted in a $1.2
million reduction in pretax income from the second quarter. This decline in the
MBS yield was caused by the faster than expected amortization of premiums on MBS
as result of the significant amount of prepayments received during the quarter.
Large prepayments resulted from the declining rate environment in 2003. Mortgage
rates have recently risen from their historic lows. As a result, management
estimates that prepayments will slow and the Bank should experience a reduction
in the amortization of those premiums and a corresponding increase in the yield
on MBS. Absent further significant declines in interest rates, management
expects the yield on MBS in the fourth quarter to be between 2.50% and 2.90%.
During the third quarter 2003, total MBS decreased $14.1 million to
$517.5 million at September 30, 2003. At September 30, 2003, the Corporation's
total MBS portfolio was 100% agency or AAA-rated and had a duration of
approximately 2.9 years, compared to 2.5 years at June 30, 2003.
Loans and Asset Quality
Net loans grew $60.4 million, or 5%, during the third quarter of 2003
to $1.3 billion at September 30, 2003. Net loans grew 26% over this time last
year. Loan volume reflects the continued strong growth in commercial and
commercial real estate (CRE) loans of $55.5 million, an increase of 10% from
balances at June 30, 2003. The increase is primarily the result of gaining local
market share due to the addition of several
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seasoned relationship managers over the past few years who have built their
careers in the local marketplace. The table below summarizes the current loan
composition and recent changes in composition.
At At
(Dollars in thousands) September 30, 2003 June 30, 2003 Quarterly Changes
----------- ---------- ------------------ ------------- -----------------
Amount % Amount % Amount %
------ ----- -------- ----- ------- ----
Commercial and CRE $ 632,213 50% $ 576,745 48% $ 55,468 10%
Residential 459,966 37 454,019 38 5,947 1
Consumer 188,245 15 189,395 16 ( 1,150) (1)
Allowance for loan losses (22,293) (2) (22,459) (2) 166 1
----------- ---- ----------- ---- -------- ---
Net Loans $ 1,258,131 100% $ 1,197,700 100% $ 60,431 5%
=========== =========== ========
Non-performing assets (NPAs) totaled $6.9 million at September 30,
2003, a significant improvement from the $8.3 million at June 30, 2003 and the
$8.9 million at September 30, 2002. NPAs as a percentage of total assets also
decreased and were 0.33% at September 30, 2003 compared to 0.41% at June 30,
2003 and 0.45% at September 30, 2002. Annualized net charge-offs in the third
quarter 2003 were 0.22% of average loans compared to 0.07% for the last quarter
and 0.09% for the same quarter in 2002. The allowance for loan losses was 1.74%
of total loans at September 30, 2003, with a coverage ratio (ratio of allowance
to non-accruing loans) of 383%.
Deposits
Core deposit relationships (demand deposits, money market and savings
accounts) increased $17.8 million, or 3% during the quarter and 14% over this
time last year; however, retail time deposits decreased $8.2 million during the
quarter. As a result, total retail deposits increased $9.6 million, or 1%,
during the third quarter to $890.9 million at September 30, 2003. These changes
reflect management's continuing strategy to allow more price-sensitive deposits
to run-off in favor of both attracting core deposits and utilizing less costly
wholesale funding. The following table summarizes the current retail deposit
composition and recent changes in composition.
At At
(Dollars in thousands) September 30, 2003 June 30, 2003 Quarterly Change
------------------ ------------- ----------------
Amount % Amount % Amount %
------ ---- ------ ---- ------ ----
Non-interest demand $ 202,647 23% $ 202,021 23% $ 626 0%
Savings 326,829 37 315,895 36 10,934 3
Money market and int. demand 116,626 13 110,420 12 6,206 6
Retail time 244,777 27 252,982 29 (8,205) (3)
---------- ---- ---------- ---- ---------
Total retail deposits $ 890,879 100% $ 881,318 100% $ 9,561 1%
========== ========== =========
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Noninterest Income
During the third quarter 2003, the Corporation recorded noninterest
income of $6.5 million, which was $589,000, or 10% greater than the comparable
quarter in 2002. The increase was primarily driven by higher ATM fee income
and service charges on core deposit accounts during the quarter primarily as a
result of underlying growth in volumes.
Noninterest Expenses
Noninterest expenses for the three months ended September 30, 2003
totaled $11.5 million, an $875,000, or 7%, decrease from the same quarter last
year. Professional fees, data processing costs, equipment expenses and other
operating expenses decreased primarily as a result of the successful completion
of the organization's reengineering effort (TOPS) in the first quarter of 2003.
Management expects a modest increase in expenses in future quarters as the
Company opens new branches in Delaware. The Company expects to add three to four
branches by the end of 2004.
Capital Management
The Corporation has continued to repurchase WSFS's common stock as one
use of the capital generated by the previously reported sales of business
segments. During the third quarter of 2003, the Corporation repurchased 349,000,
or almost 5% of its shares of common stock at an average price of $43.70 per
share. During the first nine months of 2003 the Corporation has repurchased
1,450,000 or 17% of its shares at an average price of $35.82 per share. During
the last twelve months the Corporation has repurchased 1,867,000, or 21% of its
shares at an average price of $35.24 per share. The Corporation has 579,000
shares, or almost 8% of outstanding shares remaining under the current
authorization. The Corporation currently has 7.5 million shares outstanding.
The ratio of equity to assets was a strong 8.98% and book value per
share was $25.34 at September 30, 2003.
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Marvin N. Schoenhals, Chairman and President of WSFS said, "Despite a
challenging refinance environment which significantly impacted our yield on MBS,
we are encouraged by our results for the third quarter. We expect that the yield
on MBS is a transitional issue and look forward to higher yields in the coming
quarters. Most importantly, our strategic focus on business banking continued to
show strong results, with commercial loans growing $55 million, or 10%, in the
quarter and $172 million, or 38%, over September of last year, primarily as a
result of gains in local market share."
WSFS Financial Corporation is a $2.1 billion financial services
company. At September 30, 2003, its principal subsidiary, Wilmington Savings
Fund Society, FSB, operated 22 retail banking offices in all three counties in
Delaware, as well as Chester and Delaware Counties in Pennsylvania. Other
operating subsidiaries include WSFS Credit Corporation, WSFS Reit, Inc. and WSFS
Investment Group, Inc. For more information, please visit the Bank's website at
www.wsfsbank.com.
* * *
Statements contained in this news release, which are not historical
facts, are forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
subject to risks and uncertainties which could cause actual results to differ
materially from those currently anticipated due to a number of factors, which
include, but are not limited to, factors discussed in documents filed by WSFS
Financial Corporation with the Securities and Exchange Commission from time to
time. The Corporation does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the Corporation.
# # #
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WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS
STATEMENT OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
September 30 September 30,
-------------------------- ---------------------------
2003 2002 2003 2002
----------- ----------- ------------ ------------
Interest income:
Interest and fees on loans $ 17,922 $ 17,930 $ 53,699 $ 54,362
Interest on mortgage-backed securities 2,759 1,985 10,306 5,801
Interest and dividends on investment securities 283 193 739 650
Interest on investments in reverse mortgages 1 1,995 (26) 13,092
Other interest income 212 200 836 747
----------- ----------- ------------ ------------
21,177 22,303 65,554 74,652
----------- ----------- ------------ ------------
Interest expense:
Interest on deposits 1,882 2,918 6,473 9,062
Interest on Federal Home Loan Bank advances 5,167 4,545 14,593 13,676
Interest on federal funds purchased and securities sold
under agreements to repurchase 175 178 540 510
Interest on trust preferred borrowings 489 568 1,478 2,054
Interest on other borrowed funds 65 30 253 79
----------- ----------- ------------ ------------
7,778 8,239 23,337 25,381
----------- ----------- ------------ ------------
Net interest income 13,399 14,064 42,217 49,271
Provision for loan losses 525 507 2,025 1,718
----------- ----------- ------------ ------------
Net interest income after provision for loan losses 12,874 13,557 40,192 47,553
----------- ----------- ------------ ------------
Noninterest income:
Loan servicing fee income 796 821 2,225 2,380
Deposit service charges 2,392 2,224 6,666 6,435
Credit/debit card and ATM income 2,498 2,379 7,200 6,079
Securities gains 148 - 337 23
Gain on sale of loans 217 103 1,378 201
Other income 491 426 1,846 1,587
----------- ----------- ------------ ------------
6,542 5,953 19,652 16,705
----------- ----------- ------------ ------------
Noninterest expenses:
Salaries, benefits and other compensation 6,371 6,076 19,957 18,434
Equipment expense 927 1,062 2,783 3,164
Data processing and operations expense 738 914 2,105 2,756
Occupancy expense 1,006 948 2,978 2,815
Marketing expense 433 312 1,254 939
Professional fees 457 957 1,822 2,917
Other operating expenses 1,594 2,132 5,956 5,714
----------- ----------- ------------ ------------
11,526 12,401 36,855 36,739
----------- ----------- ------------ ------------
Income from continuing operations before taxes and cumulative
effect of change in accounting principle 7,890 7,109 22,989 27,519
Income tax provision 2,562 2,093 7,944 9,609
----------- ----------- ------------ ------------
Income from continuing operations before cumulative effect of
change in accounting principle 5,328 5,016 15,045 17,910
Cumulative effect of change in accounting principle, net of taxes - - - 703
----------- ----------- ------------ ------------
Income from continuing operations 5,328 5,016 15,045 18,613
Loss on wind-down of discontinued operations, net of taxes - (563) - (563)
Income on discontinued operations of businesses held-for-sale,
net of taxes - 4,292 - 8,042
Gain on sale of businesses held-for-sale, net of taxes - 737 41,389 737
----------- ----------- ------------ ------------
Net income $ 5,328 $ 9,482 $ 56,434 $ 26,829
=========== =========== ============ ============
Diluted earnings per share:
Income from continuing operations before cumulative effect
of change in accounting principle $ 0.66 $ 0.53 $ 1.80 $ 1.90
Cumulative effect of change in accounting principle - - - 0.08
----------- ----------- ------------ ------------
Income from continuing operations 0.66 0.53 1.80 1.98
Loss on wind-down of discontinued operations - (0.06) - (0.06)
Income on discontinued operations of businesses held-for-sale - 0.45 - 0.85
Gain on sale of businesses held-for-sale - 0.08 4.94 0.08
----------- ----------- ------------ ------------
Net income $ 0.66 $ 1.00 $ 6.74 $ 2.85
=========== =========== ============ ============
Weighted average shares outstanding for diluted EPS 8,058,255 9,466,084 8,366,850 9,424,415
- ----------------------------------------------------------------------------------------------------------------------------
Performance Ratios (continuing operations only):
Return on average assets (a) 1.06 % 1.44 % 1.07 % 1.80 %
Return on average equity (a) 11.17 16.81 9.83 21.99
Net interest margin (a)(b) 2.96 4.57 3.31 5.35
Efficiency ratio (c) 56.99 61.08 58.76 54.98
- ----------------------------------------------------------------------------------------------------------------------------
See "Notes"
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WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS (Continued)
SUMMARY STATEMENT OF CONDITION:
(Dollars in thousands)
(Unaudited)
Sept 30, June 30, Sept 30,
2003 2003 2002
-------------- -------------- -------------
Summary Statement of Condition:
Assets:
- -------
Cash and due from banks $ 138,282 $ 144,982 $ 160,470
Investment securities (d) 73,043 12,738 11,446
Investment in reverse mortgages, net 138 466 32,977
Investments of Businesses held-for-sale - - 317,591
Other investments 52,786 55,443 25,241
Mortgage-backed securities (d) 517,503 531,640 156,699
Net loans (e)(f) 1,258,131 1,197,700 1,002,375
Net loans of businesses held for sale - - 18,390
Loans held for sale (e) 13,263 5,391 148,129
Other assets 38,855 41,251 42,396
Other assets of businesses held for sale - - 4,017
Loans, operating leases and
other assets of discontinued operations 14,042 23,566 61,731
-------------- -------------- -------------
Total assets $ 2,106,043 $ 2,013,177 $ 1,981,462
============== ============== =============
Liabilities and Stockholders' Equity:
- -------------------------------------
Noninterest-bearing deposits $ 202,647 $ 202,021 $ 171,554
Interest-bearing deposits 688,232 679,297 672,651
-------------- -------------- -------------
Total retail deposits 890,879 881,318 844,205
Jumbo CD's - Non Retail 30,340 21,956 23,920
Brokered CD's - - -
-------------- -------------- -------------
Total deposits excluding businesses held-for-sale 921,219 903,274 868,125
Deposits of businesses held-for-sale - - 340,155
-------------- -------------- -------------
Total deposits 921,219 903,274 1,208,280
Federal Home Loan Bank advances 768,420 743,408 445,000
Other borrowings 207,259 140,398 175,841
Other liabilities 20,116 30,122 19,534
Other liabilities of businesses held for sale - - 1,490
-------------- -------------- -------------
Total liabilities 1,917,014 1,817,202 1,850,145
-------------- -------------- -------------
Minority Interest - - 9,113
Stockholders' equity 189,029 195,975 122,204
-------------- -------------- -------------
Total liabilities, minority interest and
stockholder equity $ 2,106,043 $ 2,013,177 $ 1,981,462
============== ============== =============
- -----------------------------------------------------------------------------------------------------
Capital Ratios:
Equity to asset ratio 8.98 % 9.73 % 6.17 %
Core capital (g) (required: 4.00%) 10.81 11.27 8.66
Risk-based capital (g) (required: 8.00%) 17.95 18.77 14.16
- -----------------------------------------------------------------------------------------------------
Asset Quality Indicators (continuing operations only):
Nonperforming Assets:
Nonaccruing loans $ 5,748 $ 7,319 $ 7,744
Assets acquired through foreclosure 1,118 983 1,133
------------- -------------- -------------
Total nonperforming assets $ 6,866 $ 8,302 $ 8,877
============== ============== =============
Past due loans (h) 446 374 575
Allowance for loan losses 22,293 22,459 22,005
Ratio of nonperforming assets to total assets 0.33 % 0.41 % 0.45 %
Ratio of allowance for loan losses to total gross
loans (i) 1.74 1.84 2.11
Ratio of allowance for loan losses to nonaccruing
loans (j) 383 303 281
Ratio of quarterly net (recoveries) charge-offs to
average gross loans (a)(e) 0.22 0.07 0.09
- -----------------------------------------------------------------------------------------------------
See "Notes"
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WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS (Continued)
AVERAGE BALANCE SHEET
(Dollars in thousands)
(Unaudited)
Three Months Ended September 30,
----------------------------------------------------------------------------------------
2003 2002
--------------------------------------- -------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate (a)(b) Balance Interest Rate (a)(b)
--------------- ----------- --------- -------------- ----------- ---------
Assets:
Interest-earning assets:
Loans: (e) (k)
Real estate loans (l) $ 796,869 $ 11,346 5.70 % $ 635,542 $ 10,893 6.86 %
Commercial loans 260,972 3,106 5.08 199,871 3,045 6.52
Consumer loans 187,536 3,330 7.04 192,670 3,943 8.12
--------------- ----------- -------------- -----------
Total loans 1,245,377 17,782 5.80 1,028,083 17,881 7.07
Mortgage-backed securities (d) 522,902 2,759 2.11 152,445 1,985 5.21
Loans held-for-sale (e) 9,416 140 5.95 2,777 49 7.06
Investment securities (d) 27,013 283 4.19 11,417 193 6.76
Investment in reverse mortgages 306 1 1.31 35,142 1,995 22.71
Other interest-earning assets 46,116 212 1.82 25,629 200 3.10
--------------- ----------- -------------- -----------
Total interest-earning assets 1,851,130 21,177 4.64 1,255,493 22,303 7.20
----------- -----------
Allowance for loan losses (22,485) (21,439)
Cash and due from banks 140,233 142,104
Loans, operating leases and
other assets of discontinued operations 18,228 70,718
Assets of businesses held-for-sale - 453,124
Other noninterest-earning assets 37,728 40,106
--------------- --------------
Total assets $ 2,024,834 $ 1,940,106
=============== ==============
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Interest bearing deposits:
Money market and interest-
bearing demand $ 112,220 $ 63 0.22 $ 91,323 $ 112 0.49
Savings 318,515 359 0.45 305,738 722 0.94
Retail time deposits 247,838 1,346 2.15 259,707 1,966 3.00
Jumbo certificates of deposit-nonretail 32,662 114 1.38 18,425 118 2.54
--------------- ----------- -------------- -----------
Total interest-bearing deposits 711,235 1,882 1.05 675,193 2,918 1.71
FHLB of Pittsburgh advances 736,057 5,353 2.85 434,946 5,117 4.60
Trust preferred borrowings 50,000 489 3.83 50,000 568 4.45
Other borrowed funds 112,537 240 0.85 134,777 887 2.63
Cost of funding discontinued operations (186) (572)
Cost of funding businesses held-for-sale - (679)
--------------- ----------- -------------- -----------
Total interest-bearing liabilities 1,609,829 7,778 1.93 1,294,916 8,239 2.55
----------- -----------
Noninterest-bearing demand deposits 196,155 161,071
Liabilities of businesses held-for-sale - 345,158
Other noninterest-bearing liabilities 28,110 11,638
Minority interest - 7,994
Stockholders' equity 190,740 119,329
--------------- --------------
Total liabilities and stockholders' equity $ 2,024,834 $ 1,940,106
=============== ==============
Excess (deficit) of interest-earning assets
over interest-bearing liabilities $ 241,301 $ (39,423)
=============== ==============
Net interest and dividend income 13,399 $ 14,064
=========== ===========
Interest rate spread 2.71% 4.65%
========= =========
Net interest margin 2.96% 4.57%
========= =========
See "Notes"
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WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
---------------------------- --------------------------------
Sept 30, Sept 30, Sept 30, Sept 30,
2003 2002 2003 2002
---------------------------- --------------------------------
Stock Information:
Market price of common stock:
High $ 44.66 $ 31.95 $ 44.66 $ 31.95
Low 38.66 20.75 30.96 16.96
Close 42.12 28.00 42.12 28.00
Book value per share 25.34 13.45
Number of shares outstanding (000s) 7,460 9,094
- ------------------------------------------------------------------------------------------------------------------
Other Financial Data:
One-year repricing gap to total assets (m) (10.28)% 5.02 %
Number of associates (FTEs) (n) 436 863
Number of branch offices 22 21
- ------------------------------------------------------------------------------------------------------------------
Notes:
(a) Annualized.
(b) Computed on a fully tax-equivalent basis.
(c) Noninterest expense divided by (tax-equivalent) net interest income and
other income.
(d) Includes securities available-for-sale.
(e) Net of unearned income.
(f) Net of allowance for loan losses.
(g) Represents capital ratios of Wilmington Savings Fund Society, FSB and
subsidiaries.
(h) Accruing loans which are contractually past due 90 days or more as to
principal or interest.
(i) Excludes loans held-for-sale.
(j) Includes general reserves only.
(k) Nonperforming loans are included in average balance computations.
(l) Includes commercial mortgage loans.
(m) The difference between projected amounts of interest-sensitive assets and
interest-sensitive liabilities repricing within one year divided by total
assets, based on a current interest rate scenario.
(n) Sept 30, 2003 includes the FTEs of WCC (discontinued operations); and Sept
30, 2002 includes the FTE's of WCC (discontinued operations) and WF and
C1FN (controlled, but not wholly-owned subsidiaries).
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