UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
-----------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from____________________ to________________________
Commission File Number 0-16668
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WSFS FINANCIAL CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2866913
- --------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
838 Market Street, Wilmington, Delaware 19899
- ------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(302) 792-6000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
---- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of May 10, 1996:
Common Stock, par value $.01 per share 14,000,098
- --------------------------------------- --------------------
(Title of Class) (Shares Outstanding)
WSFS FINANCIAL CORPORATION
FORM 10-Q
INDEX
PART I. Financial Information
Page
------
Item 1. Financial Statements
-------------------
Consolidated Statement of Operations for the Three Months
Ended March 31, 1996 and 1995 (Unaudited)........................................... 3
Consolidated Statement of Condition as of March 31, 1996
(Unaudited) and December 31, 1995.................................................. 4
Consolidated Statement of Cash Flows for the Three Months Ended
March 31, 1996 and 1995 (Unaudited)................................................ 5
Notes to the Consolidated Financial Statements for the Three
Months Ended March 31, 1996 and 1995 (Unaudited)................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations.......................................................... 7
-------------------------
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.................................. 16
---------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K..................................................... 16
--------------------------------
Signatures . . . . . . . . . .. .............................................................. 17
-2-
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31,
---------------------------------------
1996 1995
------ ------
(Unaudited)
(Dollars In Thousands,
Except Per Share Data)
Interest income:
Interest and fees on loans.......................................................... $ 19,057 $ 16,758
Interest on mortgage-backed securities.............................................. 3,936 4,290
Interest and dividends on investment securities..................................... 363 1,053
Other interest income............................................................... 2,051 1,696
------------- -------------
25,407 23,797
------------- -------------
Interest expense:
Interest on deposits................................................................ 7,757 8,239
Interest on advances from the Federal Home Loan Bank of Pittsburgh.................. 4,649 3,370
Interest on Senior Notes............................................................ 846 911
Interest on federal funds purchased and securities sold under
agreements to repurchase........................................................... 846 990
Interest on other borrowed funds.................................................... 127 171
------------ ------------
14,225 13,681
------------ ------------
Net interest income................................................................. 11,182 10,116
Provision for loan losses........................................................... 318 354
------------- -------------
Net interest income after provision for loan losses................................. 10,864 9,762
------------- -------------
Other income:
Loan fee income..................................................................... 704 720
Service charges on deposit accounts................................................. 671 682
Gain on disposition of investment securities........................................ 1 23
Other income........................................................................ 460 493
------------ -------------
1,836 1,918
------------ -------------
Other expenses:
Salaries............................................................................ 3,660 3,608
Employee benefits and other personnel expenses...................................... 923 1,033
Equipment expense................................................................... 313 300
Data processing expense............................................................. 584 560
Occupancy expense................................................................... 636 605
Marketing expense................................................................... 168 306
Professional fees................................................................... 243 296
Federal deposit insurance premium................................................... 10 499
Net costs of assets acquired through foreclosure.................................... 389 771
Other operating expenses............................................................ 1,203 1,290
------------ ------------
8,129 9,268
------------ ------------
Income before taxes ................................................................. 4,571 2,412
Income tax provision (benefit)....................................................... 1,542 (477)
----------- ------------
Net income........................................................................... $ 3,029 $ 2,889
=========== ============
Earnings per share................................................................... $ .21 $ .20
Weighted average shares outstanding................................................. 14,652,046 14,607,552
The accompanying notes are an integral part of these financial statements.
-3-
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
March 31, December 31,
1996 1995
------------ -----------
(Unaudited)
(Dollars in Thousands)
Assets
Cash and due from banks........................................................ $ 27,003 $ 31,135
Federal funds sold and securities purchased under agreements to resell......... 29,000 31,500
Interest-bearing deposits in other banks....................................... 1,537 4,768
Investment securities held-to-maturity......................................... 20,641 22,378
Investment securities available-for-sale....................................... 6,358 6,394
Mortgage-backed securities held-to-maturity.................................... 271,861 219,727
Mortgage-backed securities available-for-sale.................................. 16,381 17,405
Investment in reverse mortgages, net........................................... 36,820 35,614
Loans held for sale............................................................ 5,658 4,345
Loans, net of allowance for loan losses of $24,611 at March 31, 1996
and $24,167 at December 31, 1995............................................. 787,940 787,839
Stock in Federal Home Loan Bank of Pittsburgh, at cost......................... 16,061 15,860
Assets acquired through foreclosure............................................ 12,669 11,614
Premises and equipment......................................................... 6,349 6,372
Accrued interest and other assets.............................................. 21,054 23,875
----------- ----------
Total assets................................................................... $1,259,332 $1,218,826
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Deposits....................................................................... $ 749,557 $ 724,030
Federal funds purchased and securities sold under agreements to repurchase..... 55,984 56,159
Federal Home Loan Bank advances................................................ 321,226 307,206
Senior notes................................................................... 29,100 29,850
Other borrowed funds........................................................... 6,260 7,430
Accrued expenses and other liabilities......................................... 23,381 20,605
----------- -----------
Total liabilities.............................................................. 1,185,508 1,145,280
---------- -----------
Commitments and contingencies
Stockholders' Equity:
Serial preferred stock $.01 par value, 7,500,000 shares authorized; 10%
Convertible Preferred Stock, Series 1, 2,000,000 shares authorized; none
issued and outstanding.......................................................
Common stock $.01 par value, 20,000,000 shares authorized; issued
14,178,598 at March 31, 1996 and 14,509,298 at December 31, 1995............. 145 145
Capital in excess of par value................................................. 57,136 57,136
Net unrealized losses on securities available-for-sale......................... (333) (242)
Retained earnings ............................................................. 19,536 16,507
Treasury stock at cost, 330,700 shares at March 31, 1996....................... (2,660)
----------- -----------
Total stockholders' equity..................................................... 73,824 73,546
----------- -----------
Total liabilities and stockholders' equity..................................... $1,259,332 $1,218,826
========== ==========
The accompanying notes are an integral part of these financial statements.
-4-
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31,
----------------------------------
1996 1995
------- -------
(Unaudited)
(In Thousands)
Operating activities:
Net income................................................................. $ 3,029 $ 2,889
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses............................................... 318 354
Provision for losses on assets acquired through foreclosure............. 75 393
Depreciation, accretion and amortization................................ (201) (145)
Decrease (increase) in accrued interest receivable and other assets..... 1,016 (2,084)
Origination of loans held for sale...................................... (13,089) (2,609)
Proceeds from sales of loans held for sale.............................. 11,779 2,276
Increase in accrued interest payable on deposits and other liabilities.. 2,625 3,188
Other, net.............................................................. (558) (835)
----------- ---------
Net cash provided by operating activities..................................... 4,994 3,427
---------- ---------
Investing activities:
Net decrease in interest-bearing deposits in other banks................... 3,231 3,928
Maturities of investment securities held-to-maturity....................... 1,736 428
Sales of investment securities available-for-sale.......................... 9,961
Purchases of investment securities held-to-maturity........................ (77) (39,826)
Repayments of mortgage-backed securities held-to-maturity.................. 9,195 4,396
Repayments of mortgage-backed securities available-for-sale................ 914 320
Purchases of mortgage-backed securities held-to-maturity................... (61,441)
Repayments of reverse mortgages............................................ 2,980 2,540
Disbursements for reverse mortgages........................................ (3,449) (3,582)
Sales of loans............................................................. 2,155 (54)
Purchases of loans......................................................... (3,292) (1,363)
Net (increase) decrease in loans........................................... 819 (14,749)
Net increase in stock of Federal Home Loan Bank of Pittsburgh.............. (201) (80)
Sales of assets acquired through foreclosure............................... 1,362 2,209
Disbursements for assets acquired through foreclosure...................... (54)
Premises and equipment, net................................................ (244) (703)
---------- ----------
Net cash used for investing activities........................................ (46,312) (36,629)
---------- ----------
Financing activities:
Net increase (decrease) in demand and savings deposits..................... 8,317 (8,665)
Net increase in certificates of deposit and time deposits.................. 16,993 19,060
Net increase (decrease) in federal funds purchased and securities sold under
agreements to repurchase.................................................. (175) 21,241
Receipts from additional other borrowed funds.............................. 50,000
Repayments of other borrowed funds......................................... (37,039) (903)
Repurchase of Senior notes................................................. (750)
Purchase Treasury stock.................................................... (2,660)
---------- ----------
Net cash provided by (used for) financing activities.......................... 34,686 30,733
---------- ----------
Decrease in cash and cash equivalents......................................... (6,632) (2,469)
Cash and cash equivalents at beginning of period.............................. 62,635 54,974
------------ ---------
Cash and cash equivalents at end of period.................................... $ 56,003 $ 52,505
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest.................................................................. $ 11,432 $ 10,329
Income taxes, net......................................................... 446 260
Loans transferred to assets acquired through foreclosure, net.............. 686 3,249
Net unrealized gains (losses) on securities available-for-sale, net of tax. (91) 876
The accompanying notes are an integral part of these financial statements.
-5-
WSFS FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
WSFS Financial Corporation (the "Corporation") is the parent company of
Wilmington Savings Fund Society, FSB (the "Bank"). The consolidated financial
statements for the three months ended March 31, 1996 include the accounts of the
parent company, the Bank and its wholly owned subsidiaries, WSFS Credit
Corporation, Providential Home Income Plan, Inc., 838 Investment Group, Inc.,
Community Credit Corporation and Star States Development Company,
The consolidated statement of condition as of March 31, 1996, the consolidated
statement of operations for the three months ended March 31, 1996 and 1995 and
the consolidated statement of cash flows for the three months ended March 31,
1996 and 1995 are unaudited and include all adjustments solely of a normal
recurring nature which management believes are necessary for a fair
presentation. All significant intercompany transactions are eliminated in
consolidation. Certain reclassifications have been made to prior period's
financial statements to conform them to the March 31, 1996 presentation. The
accompanying unaudited financial statements should be read in conjunction with
the audited financial statements and notes thereto included in the Corporation's
1995 Annual Report.
2. EARNINGS PER SHARE
Earnings per share is computed by dividing income applicable to common
stockholders by the weighted average number of common stock and common stock
equivalents outstanding during the periods presented. Common stock equivalents
represent the dilutive effect of the assumed exercise of certain outstanding
stock options.
-6-
WSFS FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
WSFS Financial Corporation (the "Corporation") is a savings and loan holding
company headquartered in Wilmington, Delaware. Substantially, all of the
Corporation's assets are held by its subsidiary, Wilmington Savings Fund
Society, FSB (the "Bank" or "WSFS"), the largest thrift institution
headquartered in Delaware and among the five largest financial institutions in
the state on the basis of total deposits.
The Corporation's market area is the Mid-Atlantic region of the United States
which is characterized by a diversified manufacturing and service economy. The
banking operations of WSFS are presently conducted from 14 retail banking
offices located in the greater Wilmington and Dover, Delaware area. The Bank
provides residential real estate, commercial real estate, commercial and
consumer lending services and funds these activities primarily by attracting
retail deposits. Deposits are insured by the Federal Deposit Insurance
Corporation.
Additional subsidiaries of the Bank include WSFS Credit Corporation, which is
engaged primarily in motor vehicle leasing, and 838 Investment Group, Inc. which
markets various insurance products and mutual funds through the Bank's branch
system. The Bank formed a consumer finance subsidiary in June 1994, Community
Credit Corporation ("CCC"), which opened its first office in August 1994. CCC
specializes in consumer loans secured by first and second mortgages. In November
1994, the Bank acquired Providential Home Income Plan, Inc. ("Providential"), a
San Francisco, California-based reverse mortgage lender. An additional Bank
subsidiary, Star States Development Company, is currently phasing down its real
estate investments and developments.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
Financial Condition
Total assets grew $40.5 million, or 3.3%, between December 31, 1995 and March
31, 1996. This growth occurred predominately in mortgage-backed securities
held-to-maturity which increased $51.1 million. This increase resulted from the
purchase of $61.4 million of high quality collateralized mortgage obligations.
Asset growth was financed primarily through increases in deposits and FHLB
advances along with the use of existing liquidity.
Total liabilities increased $40.2 million during the three months ended March
31, 1996. During the quarter, deposits grew $25.5 million to $749.6 million.
Interest credited to deposits totalled $2.9 million for a net inflow of deposits
of $22.6 million. Included in this increase was the acquisition of $10.4 million
in deposits from another savings institution located in Dover, Delaware.
Additional funding was provided through FHLB advances which increased $14.0
million during the quarter.
-7-
Capital Resources
Stockholders' equity increased $278,000 between December 31, 1995 and March
31, 1996. This increase reflects net income of $3.0 million for the quarter,
offset in part by the impact of the stock repurchase program which began in
March 1996. As of March 31, 1996, the Corporation had acquired 330,700 shares,
or approximately 2.3% of the common stock outstanding, in open market
transactions for $2.7 million. A total of 5% of the outstanding shares
(approximately 725,000 shares) of the Company's common stock may be repurchased
under the buyback program authorized by the Board of Directors.
A table presenting the Bank's consolidated capital position relative to the
minimum regulatory requirements as of March 31, 1996 follows (dollars in
thousands):
Consolidated Regulatory
Bank Capital Requirement Excess
-------------------- ------------------ ---------------------
Percent of Percent of Percent of
Amount Assets Amount Assets Amount Assets
------ ---------- ------ --------- ------ ---------
Tangible Capital.......................... $98,810 7.84% $18,904 1.50% $79,906 6.34%
Core Capital.............................. 98,810 7.84 50,411 4.00 48,399 3.84
Tier 1 Capital............................ 98,810 11.40 34,670 4.00 64,140 7.40
Risk-based Capital........................ 108,998 12.58 69,340 8.00 39,658 4.58
Under Office of Thrift Supervision (OTS) capital regulations, savings
institutions such as the Bank and Association must maintain "tangible" capital
equal to 1.5% of adjusted total assets, "core" capital equal to 4.0% of adjusted
total assets and "total" or "risk-based" capital (a combination of core and
"supplementary" capital) equal to 8.0% of risk-weighted assets. In addition, OTS
regulations impose certain restrictions on savings associations that have a
total risk-based capital ratio that is less than 8.0%, a ratio of tier 1 capital
to risk-weighted assets of less than 4.0% or a ratio of tier 1 capital to
adjusted total assets of less than 4.0% (or 3.0% if the institution is rated
Composite 1 under the OTS examination rating system). For purposes of these
regulations, tier 1 capital has the same definition as core capital. At March
31, 1996 the Bank is classified as a "well capitalized" institution and is in
compliance with all regulatory capital requirements.
The OTS issued a proposed regulation which incorporates an interest rate
risk (IRR) component into the risk-based capital calculation. Implementation of
this regulation has been postponed until further notice. The IRR component is
based on the lowest calculated interest-rate risk capital component for the
preceding three quarters. The institution's actual measured IRR is expressed as
the change that occurs in its net portfolio value (NPV) as a result of a
hypothetical 200 basis point increase or decrease in interest rates, subject to
an established floor. Based on the current composition of the Bank's portfolio
at March 31, 1996 and the proposed regulation, management believes that no
additional capital would be required.
Liquidity
The OTS requires institutions, such as the Bank to maintain a 5.0% minimum
liquidity ratio of cash and qualified assets to net withdrawable deposits and
borrowings due within one year. At March 31, 1996, the Bank's liquidity ratio
was 11.4% compared to 8.0% at December 31, 1995. Additionally, the
-8-
Corporation is required to maintain a reserve of 100% of the aggregate interest
expense for 12 full calendar months on the $29.1 million of 11% Senior Notes.
The interest reserve requirement on the Senior Notes at March 31, 1996 was
approximately $3.2 million.
NONPERFORMING ASSETS
The following table sets forth the Corporation's nonperforming assets,
restructured loans and past due loans at the dates indicated. Past due loans are
loans contractually past due 90 days or more as to principal or interest
payments but which remain on accrual status because they are considered well
secured and in the process of collection.
March 31, December 31,
1996 1995
----------- -------------
(Dollars in Thousands)
Nonaccruing loans:
Commercial........................................... $ 711 $ 563
Consumer............................................. 339 291
Commercial mortgages................................. 2,266 2,527
Residential mortgages................................ 3,718 3,568
Construction......................................... 3,578 3,588
-------------- --------------
Total nonaccruing loans................................. 10,612 10,537
Nonperforming investments in real estate................ 1,252 1,252
Assets acquired through foreclosure..................... 10,860 11,614
------------- --------------
Total nonperforming assets.............................. $ 22,724 $ 23,403
============= ==============
Restructured loans...................................... $ 17,359 $ 17,393
============= ==============
Past due loans:
Residential mortgages............................... $ 423 $ 111
Commercial and commercial mortgages................. 434 789
Consumer............................................ 180 143
--------------- ---------------
Total past due loans................................... $ 1,037 $ 1,043
============== ================
Ratios:
Nonaccruing loans to total loans (1)................ 1.31% 1.30%
Allowance for loan losses to total
gross loans (1)................................... 2.95 2.90
Nonperforming assets to total assets................ 1.80 1.92
(1) Excludes loans held for sale.
Nonperforming assets decreased $679,000 between March 31, 1996 and December
31, 1995. A $754,000 reduction in assets acquired through foreclosure was the
major factor contributing to the decline in nonperforming assets. As of March
31, 1996, the Corporation has reduced the level of assets acquired
-9-
through foreclosure through sales and collections of properties which totalled
$1.0 million, offset in part by additions. An analysis of the change in the
balance of nonperforming assets is presented below.
Three Months
Ended Year Ended
March 31, December 31,
1996 1995
----------------- --------------
(In Thousands)
Beginning balance..................................... $ 23,403 $ 41,440
Additions.......................................... 1,800 8,224
Collections........................................ (1,520) (12,247)
Transfers to accrual/restructured status........... (451) (10,424)
Provisions, charge-offs, other adjustments......... (508) (3,590)
-------------- ----------------
Ending balance........................................ $ 22,724 $ 23,403
============= ==============
At March 31, 1996, 65.4% of nonperforming assets of the Corporation were
comprised of nonperforming assets with a carrying value of $1.0 million or more
as compared to 64.0% at December 31, 1995. The table below reflects the
stratification of such assets at March 31, 1996 and December 31, 1995.
March 31, 1996 December 31, 1995
------------------------- ------------------------
Number Number
of items Balance of items Balance
-------- ------- -------- -------
(Dollars in Thousands)
$5 million and over.............................. 1 $ 5,850 1 $ 5,950
$1 million - $4.99 million....................... 4 9,011 4 9,021
$0.5 million - $0.99 million.....................
Under $500,000................................... 169 7,863 150 8,432
--- -------- --- -------
Total nonperforming assets....................... 174 $22,724 155 $23,403
=== ======= === =======
A key element in the Corporation's strategy to manage its loan portfolios is
the timely identification of problem loans. The Corporation's loan review system
monitors the asset quality of its loans and investments in real estate
portfolios as well as facilitates the timely identification of problem loans.
This enables the Corporation to take appropriate action and, accordingly,
minimize losses.
-10-
INTEREST SENSITIVITY
The matching of maturities or repricing periods of interest-sensitive
assets and liabilities to ensure a favorable interest rate spread and mitigate
exposure to fluctuations in interest rates is the Corporation's primary focus
for achieving its asset/liability management strategies. Management regularly
reviews interest-rate sensitivity of the Corporation and utilizes a variety of
tactics, as needed, to adjust that sensitivity within acceptable tolerance
ranges established by management. The excess of interest-earning assets over
interest-bearing liabilities that mature within one year (interest-sensitivity
gap) increased by $24.8 million to $121.7 million at March 31, 1996. Interest-
sensitive assets as a percentage of interest-sensitive liabilities within the
"one-year window" increased to 125.7% at March 31, 1996 compared to 120.5% at
December 31, 1995. Likewise, the one-year interest sensitivity gap as a
percentage of total assets increased to 9.7% at March 31, 1996 from 8.0% at
December 31, 1995.
COMPARISON FOR THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Results of Operations
The Corporation reported net income of $3.0 million, or $.21 per share, for
the three months ended March 31, 1996, compared to $2.9 million, or $.20 per
share, for the same period last year. Pretax income grew 90% to $4.6 million for
the first quarter of 1996 compared to $2.4 million for the first quarter of
1995. This increase reflects a $1.1 million increase in net interest income as
well as a $1.1 million decline in noninterest expenses.
As of December 31, 1995, the Corporation had utilized substantially all of
its income tax benefits which resulted from loss carry-forwards. Consequently,
the Corporation recorded income tax expense of $1.5 million during the quarter
ended March 31, 1996, compared to an income tax benefit of $477,000 recognized
in the first quarter of 1995.
Net Interest Income
The table on the following page, dollars expressed in thousands, provides
information concerning the balances, yields and rates on interest-earning assets
and interest-bearing liabilities during the periods indicated.
-11-
Three Months Ended March 31,
---------------------------------------------------------------------------------------
1996 1995
-------------------------------------------- ---------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
----------- --------- ----- ------- -------- ------
Assets
Interest-earning assets:
Loans (1) (2):
Real estate loans (3).............. $ 585,813 $ 13,730 9.38% $541,992 $ 12,135 8.96%
Commercial loans................... 25,330 619 9.67 24,864 635 10.22
Consumer loans .......... 199,723 4,637 9.34 169,805 3,975 9.49
---------- ----------- ----------- ----------
Total loans..................... 810,866 18,986 9.37 736,661 16,745 9.09
Mortgage-backed securities (4)........ 239,487 3,936 6.57 260,784 4,290 6.58
Loans held for sale (2)............... 3,692 71 7.69 508 13 10.24
Investment securities (4)............. 22,449 363 6.47 66,035 1,053 6.38
Other interest-earning assets (5)..... 108,277 2,051 7.49 72,545 1,696 9.35
---------- ----------- ----------- -----------
Total interest-earning assets...... 1,184,771 25,407 8.58 1,136,533 23,797 8.38
----------- -----------
Allowance for loan losses............. (24,384) (21,808)
Cash and due from banks............... 24,372 27,726
Other noninterest-earning assets...... 40,929 49,899
---------- -----------
Total assets....................... $1,225,688 $1,192,350
========== ==========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Money market and interest-
bearing demand................... $ 55,423 339 2.46 $ 85,910 560 2.64
Savings............................ 155,288 966 2.50 184,975 1,117 2.45
Time............................... 451,052 6,452 5.75 467,815 6,562 5.69
---------- ---------- ---------- ----------
Total interest-bearing deposits.. 661,763 7,757 4.71 738,700 8,239 4.52
FHLB advances......................... 313,458 4,649 5.97 226,276 3,370 6.04
Senior Notes.......................... 29,710 846 11.39 32,000 911 11.39
Other borrowed funds.................. 63,909 973 6.09 72,397 1,161 6.41
---------- ---------- ---------- ----------
Total interest-bearing liabilities. 1,068,840 14,225 5.32 1,069,373 13,681 5.12
---------- ----------
Noninterest-bearing demand deposits... 63,663 61,774
Other noninterest-bearing liabilities. 16,840 13,007
Stockholders' equity.................. 76,345 48,196
---------- ----------
Total liabilities and stockholders'
equity........................... $1,225,688 $1,192,350
========== ==========
Excess of interest-earning assets over
interest-bearing liabilities....... $ 115,931 $ 67,160
========== ==========
Net interest and dividend income...... $ 11,182 $ 10,116
=========== ============
Interest rate spread.................. 3.26% 3.26%
==== ====
Net interest margin................... 3.78% 3.56%
==== ====
Net interest and dividend income to
total average assets............... 3.65% 3.39%
==== ====
(1) Nonperforming loans are included in average balance computations.
(2) Balances are reflected net of unearned income.
(3) Includes commercial mortgage loans.
(4) Includes securities available-for-sale.
(5) Includes investment in reverse mortgages.
-12-
Net interest income grew $1.1 million between the three months ended March
31, 1996 and 1995. This increase was primarily due to a $48.8 million rise in
the excess of interest-earning assets over interest-bearing liabilities as well
as a 33% reduction in nonperforming assets between quarters. The Banks
acquisition of a $47.5 million portfolio of discounted commercial loans and
commercial mortgages in July 1995 also contributed favorably to net interest
income. The weighted average yield on this acquired portfolio is approximately
18%. Partially offsetting these favorable variances was the higher funding costs
which resulted subsequent to the sale of $197.3 million in deposits of a former
subsidiary of the Corporation, Fidelity Federal Savings and Loan (Fidelity
Federal). These lower costing deposits were replaced with higher rate
borrowings.
The net interest margin improved to 3.78% for the first quarter of 1996
compared to 3.56% for the same period in 1995. The net interest spread remained
level between comparable periods at 3.26%.
Prevailing economic conditions greatly influence net interest income and the
levels of interest-earning assets and interest-bearing liabilities. Management
anticipates interest rates to remain relatively level during 1996 as economic
growth stabilizes. The projected interest rate environment in conjunction with
current asset/liability management strategies are anticipated to favorably
impact net interest income.
-13-
Provision for Loan Losses
The following table presents a summary of the changes in the allowance for
loan losses during the periods indicated:
Three Months Ended Year Ended
March 31, 1996 December 31, 1995
------------------- -----------------
(Dollars in Thousands)
Beginning balance.............................................. $24,167 $21,700
Transfer from lease residual reserve........................... 362
Balance at acquisition for discounted commercial
mortgages................................................... 2,600
Provision for loan losses...................................... 318 1,403
Charge-offs:
Residential real estate..................................... 154
Commercial real estate (1).................................. 173 814
Commercial.................................................. 404
Consumer (2)................................................ 148 826
------- --------
Total charge-offs......................................... 321 2,198
------- --------
Recoveries:
Residential real estate..................................... 14 1
Commercial real estate (1).................................. 1 293
Commercial.................................................. 2 169
Consumer (2)................................................ 68 199
------- --------
Total recoveries.......................................... 85 662
------- --------
Net charge-offs........................................... 236 1,536
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Ending balance................................................. $24,611 $24,167
======= =======
Net charge-offs to average gross loans outstanding, net
of unearned income (3)...................................... .12% .20%
======= =======
(1) Includes commercial mortgages and construction loans.
(2) Includes lease financings.
(3) Ratio for the three months ended March 31, 1996 is annualized.
The provision for loan losses decreased by $36,000 between the three months
ended March 31, 1996 and 1995. The reduction in the provision between periods
corresponds to the continued decrease in the level of nonperforming loans
between the same periods. In addition, there were no significant charge-offs or
recoveries during the first quarter of 1996. The ratio of net charge-offs to
average gross loans outstanding (net of unearned income) was .12% for the
quarter ended March 31, 1996 as compared to .20% for the year ended December 31,
1995.
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Other Income and Expenses
Other income decreased $82,000 between the three months ended March 31,
1996 and 1995. Reduced gains on the disposition of investment securities and the
impact of the Fidelity Federal deposit sale were two of the more significant
factors contributing to the reduction in other income.
Other expenses were $8.1 million for the first quarter of 1996, a reduction
of $1.1 million from the same quarter in 1995. Federal deposit insurance
premiums declined $489,000 between periods as a result of a significantly lower
assessment rate. In addition, the net costs of foreclosed assets decreased
$382,000 between the comparable three month periods. This decrease reflects a
33% reduction between quarters in the level of nonperforming assets.
Management continues to review existing operations as well as other income
opportunities in order to enhance earnings. Accordingly, other income and
expenses may fluctuate during the year.
Income Taxes
The Corporation and its subsidiaries file a consolidated federal income tax
return and separate state income tax returns. The Corporation recorded a
provision for income taxes during the quarter ended March 31, 1996 of $1.5
million compared to an income tax benefit of $477,000 for the same quarter in
1995. The benefit recognized in the first quarter of 1995 reflects the
utilization of net operating loss carry-forwards. As of December 31, 1995, such
carry-forwards were substantially utilized.
The Corporation analyzes its projections of taxable income on an ongoing
basis and makes adjustments to its provision (benefit) for incomes taxes
accordingly.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a vote of Security Holders
At the Corporation's Annual Stockholders' Meeting held on April
25, 1996, all of the nominees for director proposed by the
Corporation were elected. The votes cast for each such nominee
were as follows:
For Withheld
--- --------
Charles G. Cheleden 11,929,778 54,854
Joseph R. Julian 11,926,143 58,489
Dale E. Wolfe 11,919,214 65,418
Item 6. Exhibits and Reports on Form 8-K
(a) None
(b) No current reports on Form 8-K were filed during the quarter.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WSFS FINANCIAL CORPORATION
Date: May 14, 1996
/s/ MARVIN N. SCHOENHALS
----------------------------------------
Marvin N. Schoenhals
Chairman, President and
Chief Executive Officer
Date: May 14, 1996 /s/ R. WILLIAM ABBOTT
----------------------------------------
R. William Abbott
Executive Vice President and
Chief Financial Officer
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