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 June 30, 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 August 9, 1996:
Common Stock, par value $.01 per share 13,832,198
- -------------------------------------- -------------------------
(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 and Six Months
Ended June 30, 1996 and 1995 (Unaudited)........................... 3
Consolidated Statement of Condition as of June 30, 1996
(Unaudited) and December 31, 1995.................................. 4
Consolidated Statement of Cash Flows for the Six Months Ended
June 30, 1996 and 1995 (Unaudited)................................. 5
Notes to the Consolidated Financial Statements for the Three and Six
Months Ended June 30, 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 6. Exhibits and Reports on Form 8-K.............................. 17
--------------------------------
Signatures . . . . . . . . . .. ....................................... 18
-2-
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ------------------------------
1996 1995 1996 1995
------------ ------------ ----------- ------------
(Unaudited)
(Dollars in Thousands, Except Per Share Data)
Interest income:
Interest and fees on loans............................ $ 19,067 $ 17,896 $ 38,124 $ 34,654
Interest on mortgage-backed securities................ 5,171 4,291 9,107 8,581
Interest and dividends on investment securities....... 587 1,062 950 2,115
Other interest income................................. 1,676 2,463 3,727 4,159
----------- ----------- ----------- -----------
26,501 25,712 51,908 49,509
----------- ----------- ----------- -----------
Interest expense:
Interest on deposits.................................. 7,817 9,424 15,574 17,663
Interest on Federal Home Loan Bank advances........... 4,556 3,427 9,205 6,797
Interest on senior notes.............................. 829 888 1,675 1,799
Interest on federal funds purchased and securities
sold under agreements to repurchase................. 1,512 1,083 2,358 2,073
Interest on other borrowed funds...................... 57 150 184 321
----------- ----------- ----------- -----------
14,771 14,972 28,996 28,653
----------- ------------ ----------- -----------
Net interest income...................................... 11,730 10,740 22,912 20,856
Provision for loan losses................................ 490 653 808 1,007
----------- ----------- ----------- -----------
Net interest income after provision for loan losses...... 11,240 10,087 22,104 19,849
------------ ------------- ------------ -----------
Other income:
Loan servicing fee income............................. 884 751 1,588 1,471
Service charges on deposit accounts................... 724 709 1,395 1,391
Securities gains (losses)............................. (78) 148 (77) 171
Other income.......................................... 570 437 1,030 930
------------ ------------- --------------- -----------
2,100 2,045 3,936 3,963
------------ ------------- --------------- -----------
Other expenses:
Salaries.............................................. 3,434 3,961 7,094 7,569
Employee benefits and other personnel expense......... 840 913 1,763 1,946
Equipment expense..................................... 319 326 632 626
Data processing expense............................... 582 553 1,166 1,113
Occupancy expense..................................... 587 614 1,223 1,219
Marketing expense..................................... 171 302 339 608
Professional fees..................................... 446 376 689 672
Federal deposit insurance premium..................... 9 500 19 999
Net costs of assets acquired through foreclosure...... 438 749 827 1,520
Other operating expenses.............................. 1,415 1,250 2,618 2,540
-------------- ------------ ------------- ------------
8,241 9,544 16,370 18,812
-------------- ------------ ------------ ------------
Income before taxes...................................... 5,099 2,588 9,670 5,000
Income tax provision (benefit)........................... 1,778 (588) 3,320 (1,065)
-------------- ------------- -------------- ------------
Net income............................................... $ 3,321 $ 3,176 $ 6,350 $ 6,065
============= ============ ============== ============
Earnings per share....................................... $ .24 $ .22 $ .44 $ .41
Weighted average shares outstanding...................... 14,116,828 14,652,309 14,384,468 14,632,617
The accompanying notes are an integral part of these financial statements.
-3-
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
June 30, December 31,
1996 1995
---------- -----------
(Unaudited)
(Dollars in Thousands)
Assets
Cash and due from banks........................................................ $ 27,036 $ 31,135
Federal funds sold and securities purchased under agreements to resell......... 20,500 31,500
Interest-bearing deposits in other banks....................................... 5,823 4,768
Investment securities held-to-maturity......................................... 18,676 22,378
Investment securities available-for-sale....................................... 26,106 6,394
Mortgage-backed securities held-to-maturity.................................... 258,533 219,727
Mortgage-backed securities available-for-sale.................................. 53,949 17,405
Investment in reverse mortgages, net........................................... 37,462 35,614
Loans held for sale............................................................ 5,256 4,345
Loans, net of allowance for loan losses of $24,400 at June 30, 1996
and $24,167 at December 31, 1995............................................. 800,692 787,839
Stock in Federal Home Loan Bank of Pittsburgh, at cost......................... 15,561 15,860
Assets acquired through foreclosure............................................ 6,639 11,614
Premises and equipment......................................................... 6,173 6,372
Accrued interest and other assets.............................................. 30,458 23,875
----------- ----------
Total assets................................................................... $1,312,864 $1,218,826
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Deposits....................................................................... $ 746,785 $ 724,030
Federal funds purchased and securities sold under agreements to repurchase..... 122,280 56,159
Federal Home Loan Bank advances................................................ 311,214 307,206
Senior notes................................................................... 29,100 29,850
Other borrowed funds........................................................... 5,227 7,430
Accrued expenses and other liabilities......................................... 24,133 20,605
----------- -----------
Total liabilities.............................................................. 1,238,739 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
13,832,198 at June 30, 1996 and 14,509,298 at December 31, 1995.............. 145 145
Capital in excess of par value................................................. 57,250 57,136
Net unrealized losses on securities available-for-sale......................... (402) (242)
Retained earnings ............................................................. 22,857 16,507
Treasury stock at cost, 725,300 shares at June 30, 1996........................ (5,725)
--------- -----------
Total stockholders' equity..................................................... 74,125 73,546
----------- -----------
Total liabilities and stockholders' equity..................................... $1,312,864 $1,218,826
========== ==========
The accompanying notes are an integral part of these financial statements.
-4-
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended June 30,
1996 1995
---- ----
(Unaudited)
(In Thousands)
Operating activities:
Net income................................................................. $ 6,350 $ 6,065
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses............................................... 808 1,007
Provision for losses on assets acquired through foreclosure............. 250 736
Depreciation, accretion and amortization................................ (416) (766)
Increase in accrued interest receivable and other assets................ (1,055) (1,231)
Origination of loans held for sale...................................... (21,577) (6,519)
Proceeds from sales of loans held for sale.............................. 20,641 6,127
Increase in accrued interest payable on deposits and other liabilities.. 3,220 7,512
Other, net.............................................................. (880) (1,521)
---------- ---------
Net cash provided by operating activities..................................... 7,341 11,410
---------- ---------
Investing activities:
Net decrease (increase) in interest-bearing deposits in other banks........ (1,055) 1,279
Maturities of investment securities held-to-maturity....................... 3,626 428
Sales of investment securities available-for-sale.......................... 9,937 53,543
Purchases of investment securities available for sale...................... (29,844) (39,898)
Repayments of mortgage-backed securities held-to-maturity.................. 24,272 9,241
Repayments of mortgage-backed securities available-for-sale................ 232 754
Purchases of mortgage-backed securities held-to-maturity................... (61,441)
Purchases of mortgage-backed securities available-for-sale................. (38,763)
Repayments of reverse mortgages............................................ 5,733 6,184
Disbursements for reverse mortgages........................................ (6,262) (7,232)
Sales of loans............................................................. 7,042 3,152
Purchases of loans......................................................... (11,125) (3,685)
Net increase in loans...................................................... (10,380) (17,859)
Sales of assets acquired through foreclosure............................... 2,832 4,079
Disbursements for assets acquired through foreclosure...................... (120)
Disbursements for real estate held for investment.......................... (1,321)
Other, net................................................................. (63) (398)
---------- ---------
Net cash provided by (used for) investing activities.......................... (106,580) 9,468
---------- ---------
Financing activities:
Net increase (decrease) in demand and savings deposits..................... 8,583 (10,181)
Net increase in certificates of deposit and time deposits.................. 14,479 103,529
Net increase in federal funds purchased and securities sold under
agreements to repurchase.................................................. 66,120 1,406
Receipts from additional other borrowed funds.............................. 55,000
Repayments of other borrowed funds......................................... (53,681) (1,080)
Repurchase of senior notes................................................. (750) (2,150)
Issuance of common stock................................................... 114
Purchase treasury stock.................................................... (5,725)
---------- ---------
Net cash provided by financing activities..................................... 84,140 91,524
---------- ---------
Increase (decrease) in cash and cash equivalents.............................. (15,099) 112,402
Cash and cash equivalents at beginning of period.............................. 62,635 54,974
---------- ---------
Cash and cash equivalents at end of period.................................... $ 47,536 $ 167,376
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest.................................................................. $ 23,853 $ 20,137
Income taxes, net......................................................... 4,333 779
Loans transferred to assets acquired through foreclosure, net.............. 2,325 4,851
Net unrealized gains (losses) on securities available-for-sale, net of tax. (160) 1,270
Assets acquired through foreclosure transferred to investments in real estate. 4,258
The accompanying notes are an integral part of these financial statements.
-5-
WSFS FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 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 and six months ended June 30, 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 June 30, 1996, the consolidated
statement of operations for the three and six months ended June 30, 1996 and
1995 and the consolidated statement of cash flows for the six months ended June
30, 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 June 30, 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. Community Credit Corporation ("CCC"), which opened its first office in
August 1994, 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 $94.0 million, or 7.7%, during the first six months of 1996
to $1.3 billion. The majority of this growth occurred in mortgage-backed
securities which increased $75.4 million. This increase resulted from the
purchase of approximately $100.0 million in collateralized mortgage obligations,
offset in part by principal repayments. In addition, investment securities and
net loans increased $16.0 million and $12.9 million, respectively. These
increases were funded with short-term borrowings and deposit growth as well as
the use of existing liquidity.
Total liabilities increased $93.5 million during the first half of 1996. This
increase reflects a $66.1 million rise in securities sold under agreements to
repurchase and deposit growth of $22.8 million. Interest credited to deposits
during the six months ended June 30, 1996 totalled $6.4 million for a net inflow
of $16.4 million in deposits. Deposit growth includes the acquisition of $10.4
million in deposits from another institution located in Dover, Delaware.
-7-
Capital Resources
Stockholders' equity increased $579,000 between December 31, 1995 and June
30, 1996. This increase reflects net income of $6.4 million for the first six
months of 1996, offset in part by the impact of the stock repurchase program
which began in March 1996. The Corporation completed the stock repurchase
program in May 1996 and acquired 725,300 shares, or approximately 5% of the
common stock outstanding, in open market transactions for $5.7 million.
A table presenting the Bank's consolidated capital position relative to the
minimum regulatory requirements as of June 30, 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.......................... $92,900 7.08% $19,681 1.50% $73,219 5.58%
Core Capital.............................. 92,900 7.08 52,484 4.00 40,416 3.08
Tier 1 Capital............................ 92,900 10.61 35,026 4.00 57,874 6.61
Risk-based Capital........................ 97,370 11.12 70,055 8.00 27,315 3.12
Under Office of Thrift Supervision (OTS) capital regulations, savings
institutions such as the Bank 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 June 30, 1996 the Bank is classified
as a "well capitalized" institution and is in compliance with all regulatory
capital requirements.
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 June 30, 1996, the Bank's liquidity ratio was
11.4% compared to 8.0% at December 31, 1995. Additionally, the 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 June 30, 1996 was approximately $3.2
million.
-8-
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.
June 30, December 31,
1996 1995
-------------- ---------------
(Dollars in Thousands)
Nonaccruing loans:
Commercial........................................... $ 688 $ 563
Consumer............................................. 419 291
Commercial mortgages................................. 2,608 2,527
Residential mortgages................................ 3,176 3,568
Construction......................................... 3,568 3,588
-------------- --------------
Total nonaccruing loans................................. 10,459 10,537
Nonperforming investments in real estate................ 1,252 1,252
Assets acquired through foreclosure..................... 6,639 11,614
-------------- --------------
Total nonperforming assets.............................. $ 18,350 $ 23,403
============= ==============
Restructured loans...................................... $ 17,382 $ 17,393
============= ==============
Past due loans:
Residential mortgages............................... $ 812 $ 111
Commercial and commercial mortgages................. 518 789
Consumer............................................ 68 143
-------------- ---------------
Total past due loans................................... $ 1,398 $ 1,043
============== ===============
Ratios:
Nonaccruing loans to total loans (1)................ 1.27% 1.30%
Allowance for loan losses to total
gross loans (1)................................... 2.89 2.90
Nonperforming assets to total assets................ 1.40 1.92
(1) Excludes loans held for sale.
Nonperforming assets decreased $5.1 million between December 31, 1995 and
June 30, 1996. The major factor contributing to this decline was the
reclassification of a $4.2 million asset acquired through foreclosure to an
investment in real estate. The reclassification was completed in conjunction
with the purchase of an adjacent property in order to maximize value. The
combined properties generate rental income for the Bank. An analysis of the
change in the balance of nonperforming assets is presented on the following
page.
-9-
Six Months
Ended Year Ended
June 30, December 31,
1996 1995
----------------- -----------
(In Thousands)
Beginning balance..................................... $ 23,403 $ 41,440
Additions.......................................... 4,222 8,224
Collections........................................ (3,106) (12,247)
Transfers to accrual/restructured status........... (1,000) (10,424)
Provisions, charge-offs, other adjustments......... (5,169) (3,590)
------------- ------------
Ending balance........................................ $ 18,350 $ 23,403
============== ============
At June 30, 1996, 56.9% 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 June 30, 1996 and December 31, 1995.
June 30, 1996 December 31, 1995
------------------------ --------------------
Number Number
of items Balance of items Balance
-------- ------- -------- -------
(Dollars in Thousands)
$5 million and over.............................. 1 $ 5,699 1 $ 5,950
$1 million - $4.99 million....................... 3 4,743 4 9,021
$0.5 million - $0.99 million.....................
Under $500,000................................... 163 7,908 150 8,432
--- ------- --- -------
Total nonperforming assets....................... 167 $18,350 155 $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) decreased by $13.2 million to $83.7 million at June 30, 1996.
Interest-sensitive assets as a percentage of interest-sensitive liabilities
within the "one-year window" decreased to 115.4% at June 30, 1996 compared to
120.5% at December 31, 1995. Likewise, the one-year interest sensitivity gap as
a percentage of total assets decreased to 6.4% at June 30, 1996 from 8.0% at
December 31, 1995.
COMPARISON FOR THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Results of Operations
The Corporation reported net income of $3.3 million, or $.24 per share, for
the three months ended June 30, 1996 compared to $3.2 million, or $.22 per
share, for the second quarter of 1995. Pretax earnings for the second quarter of
1996 grew 97% over the same quarter in 1995 to $5.1 million. Net income for the
six months ended June 30, 1996 was $6.4 million, or $.44 per share, compared to
$6.1 million, or $.41 per share for the same period last year. Pretax earnings
for the first half of 1996 were $9.7 million, a 93% improvement over the same
period in 1995. The results for the three and six months ended June 30, 1996
reflect lower noninterest expense and higher net interest income.
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 $1.8 and $3.3 million during the
quarter and six months ended June 30, 1996, respectively, compared to income tax
benefits of $588,000 and $1.1 million recognized in the same periods in 1995.
Net Interest Income
The tables on the following two pages, 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 June 30,
-----------------------------------------------------------------------------------
1996 1995
---------------------------------------- -------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
----------- ---------- ------ ----------- ---------- -------
Assets
Interest-earning assets:
Loans (1) (2):
Real estate loans (3).............. $ 587,268 $ 13,587 9.25% $ 543,711 $ 12,858 9.46%
Commercial loans................... 26,058 644 9.78 26,185 835 12.62
Consumer loans .................... 204,415 4,706 9.26 176,301 4,184 9.52
---------- ----------- ----------- ----------
Total loans..................... 817,741 18,937 9.26 746,197 17,877 9.58
Mortgage-backed securities (4)........ 308,599 5,171 6.70 256,552 4,291 6.69
Loans held for sale (2)............... 7,339 130 7.09 787 19 9.66
Investment securities (4)............. 35,573 587 6.60 65,171 1,062 6.52
Other interest-earning assets (5)..... 78,598 1,676 8.53 125,571 2,463 7.85
--------- ----------- ------------ -----------
Total interest-earning assets...... 1,247,850 26,501 8.49 1,194,278 25,712 8.61
----------- -----------
Allowance for loan losses............. (24,618) (21,406)
Cash and due from banks............... 22,636 25,861
Other noninterest-earning assets...... 41,797 51,752
---------- -----------
Total assets....................... $1,287,665 $1,250,485
========== ==========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Money market and interest-
bearing demand................... $ 54,717 361 2.65 $ 81,027 536 2.65
Savings............................ 159,459 1,044 2.63 179,257 1,117 2.50
Time............................... 458,289 6,412 5.63 518,900 7,771 6.01
---------- ---------- ---------- ----------
Total interest-bearing deposits.. 672,465 7,817 4.68 779,184 9,424 4.85
FHLB advances......................... 312,756 4,556 5.86 226,265 3,427 6.08
Senior Notes.......................... 29,100 829 11.39 31,172 888 11.39
Other borrowed funds.................. 110,506 1,569 5.68 78,520 1,233 6.28
----------- ------------ ---------- ----------
Total interest-bearing liabilities. 1,124,827 14,771 5.25 1,115,141 14,972 5.37
------------ ---------
Noninterest-bearing demand deposits... 68,579 65,176
Other noninterest-bearing liabilities. 18,823 18,415
Stockholders' equity.................. 75,436 51,753
---------- ----------
Total liabilities and stockholders'
equity........................... $1,287,665 $1,250,485
========== ==========
Excess of interest-earning assets over
interest-bearing liabilities....... $ 123,023 $ 79,137
========== ==========
Net interest and dividend income...... $ 11,730 $ 10,740
=========== =========
Interest rate spread.................. 3.24% 3.24 %
==== ====
Net interest margin................... 3.76% 3.60 %
==== ====
Net interest and dividend income to
total average assets............... 3.64% 3.44 %
==== ====
(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-
Six Months Ended June 30,
------------------------------------------------------------------------------
1996 1995
------------------------------------- --------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
---------- ---------- ------ ----------- ----------- ------
Assets
Interest-earning assets:
Loans (1) (2):
Real estate loans (3).............. $586,540 $ 27,317 9.31% $ 542,857 $ 24,993 9.21%
Commercial loans................... 25,694 1,263 9.72 25,528 1,470 11.45
Consumer loans .................... 202,069 9,343 9.30 173,071 8,159 9.51
---------- --------- ----------- ---------
Total loans..................... 814,303 37,923 9.31 741,456 34,622 9.34
Mortgage-backed securities (4)........ 274,043 9,107 6.65 258,656 8,581 6.64
Loans held for sale (2)............... 5,516 201 7.29 648 32 9.88
Investment securities (4)............. 29,011 950 6.55 65,601 2,115 6.45
Other interest-earning assets (5)..... 93,438 3,727 7.98 99,204 4,159 8.38
---------- ---------- ---------- ----------
Total interest-earning assets...... 1,216,311 51,908 8.54 1,165,565 49,509 8.50
---------- ----------
Allowance for loan losses............. (24,501) (21,606)
Cash and due from banks............... 23,504 26,788
Other noninterest-earning assets...... 41,363 50,831
---------- ----------
Total assets....................... $1,256,677 $1,221,578
========== ==========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Money market and interest-
bearing demand................... $ 55,070 700 2.56 $ 83,455 1,096 2.65
Savings............................ 157,374 2,010 2.57 182,100 2,234 2.47
Time............................... 454,670 12,864 5.69 493,499 14,333 5.86
----------- ---------- ----------- ----------
Total interest-bearing deposits.. 667,114 15,574 4.69 759,054 17,663 4.69
FHLB advances......................... 313,107 9,205 5.91 226,270 6,797 6.06
Senior Notes.......................... 29,405 1,675 11.39 31,584 1,799 11.39
Other borrowed funds.................. 87,208 2,542 5.83 75,475 2,394 6.34
---------- ---------- ----------- ------------
Total interest-bearing liabilities. 1,096,834 28,996 5.29 1,092,383 28,653 5.25
--------- ----------
Noninterest-bearing demand deposits... 66,121 63,484
Other noninterest-bearing liabilities. 17,832 15,726
Stockholders' equity.................. 75,890 49,985
---------- ----------
Total liabilities and stockholders'
equity........................... $1,256,677 $1,221,578
========== ==========
Excess of interest-earning assets over
interest-bearing liabilities....... $ 119,477 $ 73,182
========== ==========
Net interest and dividend income...... $ 22,912 $ 20,856
========== ==========
Interest rate spread.................. 3.25% 3.25 %
==== ====
Net interest margin................... 3.77% 3.58 %
==== ====
Net interest and dividend income to
total average assets............... 3.65% 3.41 %
==== ====
(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.
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Net interest income grew $990,000 between the second quarter of 1996 and 1995
and $2.1 million between the six months ended June 30, 1996 and 1995. This
improvement reflects continued growth in the excess of interest-earning assets
over interest-bearing liabilities and a 40% reduction in the levels of
nonperforming assets between June 30, 1996 and 1995. Also, favorably impacting
net interest income was the acquisition of a $47.5 million portfolio of
discounted commercial loans and commercial mortgages yielding approximately 18%.
Partially offsetting these favorable variances was higher funding costs which
resulted subsequent to the sale of $197.3 million in deposits of the
Corporation's former subsidiary, Fidelity Federal Savings and Loan, in the third
quarter of 1995. These lower costing deposits were replaced with higher rate
borrowings.
The net interest margin improved to 3.76% and 3.77% for the three and six
months ended June 30, 1996, compared to 3.60% and 3.58% for the same respective
periods last year. The net interest spread remained level at 3.24% and 3.25%
between comparable three and six month periods.
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.
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Provision for Loan Losses
The following table presents a summary of the changes in the allowance for
loan losses during the periods indicated:
Six Months Ended Year Ended
June 30, 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...................................... 808 1,403
Charge-offs:
Residential real estate..................................... 40 154
Commercial real estate (1).................................. 172 814
Commercial.................................................. 495 404
Consumer (2)................................................ 387 826
--------- --------
Total charge-offs......................................... 1,094 2,198
--------- --------
Recoveries:
Residential real estate..................................... 14 1
Commercial real estate (1).................................. 2 293
Commercial.................................................. 3 169
Consumer (2)................................................ 138 199
--------- ---------
Total recoveries.......................................... 157 662
--------- ---------
Net charge-offs........................................... 937 1,536
--------- --------
Ending balance................................................. $24,400 $24,167
======= =======
Net charge-offs to average gross loans outstanding, net
of unearned income (3)...................................... .23% .20%
========= =========
(1) Includes commercial mortgages and construction loans.
(2) Includes lease financings.
(3) Ratio for the six months ended June 30, 1996 is annualized.
The provision for loan losses decreased by $199,000 between the six months
ended June 30, 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. One significant charge-off of a $495,000 nonaccruing
commercial loan was recorded during the first half of 1996. The ratio of net
charge-offs to average gross loans outstanding (net of unearned income) was .23%
for the six months ended June 30, 1996 as compared to .20% for the year ended
December 31, 1995.
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Other Income and Expenses
Other income for the three months ended June 30, 1996 exceeded the same
quarter in 1995 by $55,000. Other income for the six months ended June 30, 1996
was $27,000 lower than the comparable period in 1995. This decrease between
periods was primarily the result of net losses in the disposition of securities
in 1996. The three and six month periods were both favorably impacted by higher
loan servicing fee income.
Other expenses for the second quarter of 1996 were $1.3 million lower than
the same period last year. Salary related expenses were reduced $527,000 as a
result of a decrease in the number of full time equivalent employees and a
reduction in expenses associated with stock appreciation rights. In addition,
federal deposit insurance premiums and the net costs of foreclosed assets
declined $491,000 and $311,000, respectively, between comparable three month
periods. The decrease in deposit insurance premiums resulted from a
significantly lower assessment rate. Lower costs of foreclosed assets reflect a
40% reduction in the level of nonperforming assets between June 30, 1996 and
1995.
Other expenses for the six months ended June 30, 1996 were $2.4 million
below the first half of 1995. Consistent with the second quarter results, the
six month period was impacted by lower deposit insurance premiums, the net costs
of foreclosed assets and salary related expenses. These expenses were reduced
$980,000, $693,000 and $475,000, respectively.
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 three and six months ended June 30, 1996
of $1.8 million and $3.3 million, respectively, compared to income tax benefits
of $588,000 and $1.1 million for the same periods in 1995. The benefits
recognized in 1995 reflect 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 for incomes taxes accordingly.
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PART II. OTHER INFORMATION
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: August 13, 1996 /s/ MARVIN N. SCHOENHALS
------------------------------------------------
Marvin N. Schoenhals
Chairman, President and Chief Executive Officer
Date: August 13, 1996 /s/ R. WILLIAM ABBOTT
------------------------------------------------
R. William Abbott
Executive Vice President and
Chief Financial Officer
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