WSFS Reports EPS of $0.90 for the 3rd Quarter 2008; $0.12 Dividend Declared, a 20 Percent Increase From 3rd Quarter 2007
WILMINGTON, Del., Oct. 23, 2008 (GLOBE NEWSWIRE) -- WSFS Financial Corporation (Nasdaq:WSFS), the parent company of Wilmington Savings Fund Society, FSB, reported quarterly diluted earnings per share of $0.90, or net income of $5.7 million, compared to $1.11, or $7.1 million in the third quarter of 2007. Net income for the first nine months of 2008 was $19.6 million, or $3.12 per diluted share, compared to $22.2 million, or $3.38 in 2007.
The net interest margin improved to 3.28% for the quarter, from 3.20% in the second quarter of 2008 and 3.04% in the third quarter of 2007. Net interest income increased 16% or $3.2 million from the third quarter of 2007.
CEO outlook and commentary:
Mark A. Turner, WSFS' President and CEO, said, "Key measures for our Company reflect the success we are having in growing our core banking business. Our quarterly results show positive operating leverage compared to last year's normalized third quarter, meaning that our revenues grew faster than our operating expenses. Our positive operating leverage is a reflection of the success that we have had in growing our core banking franchise and builds on the positive results we are experiencing in many of our Company's performance metrics, such as continued margin expansion.
"However, the weak economic environment continues to negatively affect our credit statistics. Nonperforming assets are up to 1.12% and net charge-offs are also up, reflecting progress we are making in resolving problem credits. The impact of a weak economic environment resulted in a provision for loan losses well above the levels we reported last quarter and for the third quarter of last year.
"As I have discussed in previous quarters, our loan portfolio is well diversified as we manage within internal concentration limits developed a number of years ago. These limits govern the size of our loan portfolios, including construction and land development (CLD) loans. In fact, during the quarter our residential CLD loan portfolio decreased to just 6% of total loans.
"As a result of our prudent risk management, we have no exposure to trust preferred securities, Fannie Mae or Freddie Mac preferred stock, or asset backed securities collateralized by sub-prime mortgages. Our securities portfolio continues to perform well and is comprised predominantly of 'plain vanilla' AAA-rated short duration securities.
"The strength of our balance sheet and earnings allows us to take advantage of opportunities to continue to grow our franchise, such as the acquisition of Sun National Bank's Delaware branches, which is expected to close later this month. This acquisition presents an opportunity for us to build our branch network and customer base, increase our earnings and improve our funding costs and liquidity -- benefits that are particularly attractive in the current operating environment."
Third Quarter 2008 Discussion of Financial Results
Net interest income
Net interest income for the third quarter of 2008 was $23.3 million and the net interest margin was 3.28%, displaying strong growth of $940,000 and 8 basis points (0.08%) from the second quarter of 2008. These increases reflect the continued positive impact of deposit pricing management efforts, combined with a recovery from the temporary negative impact of Federal Reserve rate reductions made early in the year. Similarly, additional recent Federal Reserve rate reductions and deposit pricing competition will put pressure on the net interest margin in the near term.
Net interest income for the third quarter of 2008 improved by $3.2 million, or 16% in comparison to the third quarter of 2007. Accordingly, the net interest margin increased a strong 24 basis points (0.24%) from 3.04% reported in the third quarter of 2007.
Total commercial loans increased 11% or $167.2 million from September 2007
Commercial and commercial real estate (CRE) loans increased a strong $167.2 million, or 11% over September 30, 2007. Nearly three quarters of this growth ($120.8 million) was due to commercial and industrial (C&I) loans. Construction and land development (CLD) loans decreased $27.0 million, or 11% from September 30, 2007. Making up the difference, commercial mortgages increased $73.4 million, or 16%. Total net loans were $2.3 billion at September 30, 2008, an increase of $172.2 million, or 8%, over September 30, 2007.
Commercial and CRE loans increased $33.1 million, or 2% (8% annualized) over June 30, 2008 levels. This included a $46.4 million, or 6% (22% annualized) increase in C&I loans. CLD loans decreased $9.0 million, or 4% (15% annualized) during the quarter. Commercial mortgages were relatively flat compared to the previous quarter. Total net loans increased $39.2 million, or 2% (7% annualized) over June 30, 2008.
The following table summarizes the current loan balances and composition compared to prior periods.
The Company recorded a provision for loan losses of $3.5 million in the third quarter of 2008, compared to $1.0 million in the third quarter of 2007 and $2.4 million in the second quarter of 2008. The ratio of allowance for loan losses to total loans was 1.20% at September 30, 2008, compared to 1.22% at June 30, 2008. This ratio stood at 1.32% at September 30, 2007. The increased level of provisioning this quarter is attributable to continued loan growth in our commercial portfolio, combined with the current economic conditions, particularly in the housing sector and those businesses related to residential real estate.
Nonperforming assets as a percentage of total assets was 1.12% at September 30, 2008 compared to 0.95% at June 30, 2008 and 0.53% at September 30, 2007. This was driven by an increase in nonperforming real estate construction related loans.
Annualized net charge-offs in the third quarter of 2008 were 0.57% of average loans compared to 0.19% for the second quarter of 2008 and 0.11% for the third quarter of 2007. On a year-to-date basis net charge-offs for 2008 were 0.30% compared to 0.08% for 2007. The increase in net charge-offs reflects our progress in resolving problem credits, utilizing reserves provided in previous periods. The provision for loan losses of $3.5 million recorded during the third quarter of 2008 slightly exceeded net charge-offs of $3.3 million recorded during the quarter.
Total customer deposits (core deposits and customer time deposits) were $1.5 billion at September 30, 2008, an increase of $85.0 million, or 6%, over balances at September 30, 2007. The growth in deposits was mainly the result of an increase in demand accounts and customer time deposits.
Customer deposits increased $45.1 million, or 3% (12% annualized) over levels reported for June 30, 2008. Consistent with the year-over-year increase, the linked quarter increase in deposits was mainly due to increased demand accounts and customer time deposits.
The following table summarizes current customer deposit balances and composition compared to prior periods.
During the third quarter of 2008, the Company recorded noninterest income of $11.7 million, compared to $12.8 million in the third quarter of 2007. Contributing to this decrease was a $789,000 reduction in credit/debit card and ATM income, the result of reduced prime-rate based ATM bailment fees from Cash Connect, WSFS' ATM division. While noninterest income comparisons were negatively impacted by lower bailment fees, the net interest margin continued to benefit from our lower funding costs for these borrowings. Offsetting this decrease were increases in deposit service charges of $417,000 and loan fee income of $204,000, primarily due to our investment in franchise growth. In addition, noninterest income was enhanced by $176,000 in fees from 1st Reverse. The third quarter of 2007 included an $882,000 one-time gain on the sale of the WSFS' credit card portfolio. Excluding the revenues from Cash Connect and the previously mentioned third quarter 2007 one-time gain on the sale of the WSFS' credit card portfolio, noninterest income increased $546,000, or 8%, from the third quarter of 2007.
Noninterest income increased slightly in comparison to the second quarter of 2008. Deposit service charges and credit/debit card and ATM income were seasonally higher than the previous quarter while loan fee income was lower due to reduced reverse mortgage fees.
Noninterest expenses for the third quarter of 2008 totaled $22.8 million, which was $1.4 million, or 7% greater than the third quarter of 2007. Excluding $898,000 of expenses related to 1st Reverse as we continue to develop its sales and operational platforms, expenses increased $546,000, or 3% over the third quarter of 2007. This increase included $562,000 in other operating expenses and $329,000 in professional fees. The increase in other operating expenses included a $174,000 increase in the FDIC charges due to increased assessment rates, as well as an increase in correspondent bank fees. The increase in professional fees related to increased legal expenses, reflecting increased costs relating to problem credits, typical at this point in the economic cycle. Partially offsetting these increases was a $351,000 decrease in marketing expenses due to higher expenses during last year's launch of our brand campaign.
Noninterest expenses increased $1.6 million, or 8% from the second quarter of 2008. Excluding $430,000 of increased expenses related to 1st Reverse, expenses were $1.2 million, or 6% over the second quarter of 2008. This included salaries and benefits of $635,000, other operating expenses of $389,000 and professional fees of $272,000, consistent with the previously mentioned year-over-year analysis.
On October 14, Visa notified members that it had reached a settlement in principle to a lawsuit brought against it by Discover; however, Visa has not disclosed the amount of this settlement. In the fourth quarter of 2007, we set aside a reserve for our portion of expenses related to this settlement based on currently available information.
The Company recorded a $3.1 million income tax provision (reflecting a 35.0% effective tax rate) in the third quarter of 2008 versus $3.4 million in the third quarter of 2007 (32.4% effective tax rate) and $3.7 million in the second quarter of 2008 (35.8% effective tax rate). Volatility on effective tax rates from quarter to quarter is expected and will continue into the future.
The Company strengthened its capital by growing equity $20.3 million over September 30, 2007 levels. All capital levels are in excess of "well-capitalized" regulatory benchmarks, the regulators' highest capital rating. The Bank's Tier 1 capital ratio was 10.97%, significantly above the 6.00% level required to be considered "well-capitalized" under regulatory definitions. The ratio of tangible equity to assets increased to 6.74% at September 30, 2008 from 6.66% at June 30, 2008, as equity increased $6.6 million. Tangible book value per share also increased to $35.43 at September 30, 2008, from $34.66 at June 30, 2008 and $32.18 at September 30, 2007. During the quarter the Company did not repurchase any shares of common stock. At September 30, 2008, the Company had 531,000 shares remaining under its current share repurchase authorization, or 8.6% of its 6.2 million outstanding shares.
WSFS' Board of Directors declares a quarterly cash dividend of $0.12 per share
The Board of Directors also declared a quarterly cash dividend of $0.12 per share. This dividend represents a 20% increase from that of the third quarter of 2007. This dividend will be paid on November 28, 2008, to shareholders of record as of November 7, 2008.
WSFS Financial Corporation is a $3.3 billion financial services company. Its primary subsidiary, Wilmington Savings Fund Society, FSB (WSFS Bank), operates 31 retail banking offices located in Delaware and Pennsylvania, as well as three loan production offices in Dover, Delaware; Blue Bell, Pennsylvania and Annandale, Virginia. WSFS Bank provides comprehensive financial services including personal trust and wealth management. Other subsidiaries include WSFS Investment Group, Inc., Montchanin Capital Management, Inc. and 1st Reverse Financial Services, LLC. Founded in 1832, WSFS is one of the ten oldest banks in the United States continuously operating under the same name. 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.
Source: Globe Newswire (October 23, 2008 - 4:36 PM EDT)
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WSFS Financial Corporation
Stephen A. Fowle