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, 2007
-------------------------------------------------
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
-------
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)
500 DELAWARE AVENUE, WILMINGTON, DELAWARE 19801
-------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(302) 792-6000
--------------------------------------------------------------------------------
(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 by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (Check
one): Large accelerated filer Accelerated filer X Non-accelerated filer
--- --- ---
Indicate by check mark whether the registrant is a shell company (as
defined in Exchange Act Rule 12b-2). YES NO X
---- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of May 4, 2007:
COMMON STOCK, PAR VALUE $.01 PER SHARE 6,287,179
-------------------------------------- --------------------
(Title of Class) (Shares Outstanding)
WSFS FINANCIAL CORPORATION
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements (Unaudited)
--------------------------------
Consolidated Statement of Operations for the Three Months
Ended March 31, 2007 and 2006 ..................................................... 3
Consolidated Statement of Condition as of March 31, 2007
and December 31, 2006.............................................................. 4
Consolidated Statement of Cash Flows for the Three Months Ended
March 31, 2007 and 2006............................................................ 5
Notes to the Consolidated Financial Statements for the Three
Months Ended March 31, 2007 and 2006 .............................................. 7
Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations.......................................................... 14
-------------------------
Item 3. Quantitative and Qualitative Disclosures About Market Risk........................... 23
----------------------------------------------------------
Item 4. Controls and Procedures ............................................................. 23
------------------------
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................... 23
-----------------
Item 1A. Risk Factors......................................................................... 23
------------
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds ......................... 23
-------------------------------------------------------------
Item 3. Defaults upon Senior Securities...................................................... 23
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders.................................. 23
---------------------------------------------------
Item 5. Other Information ................................................................... 23
-----------------
Item 6. Exhibits ............................................................................ 23
---------
Signatures .................................................................................... 24
Exhibit 31 Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ........... 25
Exhibit 32 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ........... 27
2
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended March 31,
----------------------------
2007 2006
---- ----
(Unaudited)
(In Thousands, Except Per Share Data)
INTEREST INCOME:
Interest and fees on loans .......................... $38,469 $32,096
Interest on mortgage-backed securities .............. 6,237 7,332
Interest and dividends on investment securities ..... 1,714 635
Other interest income ............................... 668 414
------- -------
47,088 40,477
------- -------
INTEREST EXPENSE:
Interest on deposits ................................ 14,388 8,177
Interest on Federal Home Loan Bank advances ......... 8,922 10,743
Interest on trust preferred borrowings .............. 1,177 1,017
Interest on other borrowings ........................ 1,541 1,237
------- -------
26,028 21,174
------- -------
Net interest income ...................................... 21,060 19,303
Provision for loan losses ................................ 371 688
------- -------
Net interest income after provision for loan losses ...... 20,689 18,615
------- -------
NONINTEREST INCOME:
Credit/debit card and ATM income .................... 4,483 4,160
Deposit service charges ............................. 3,602 2,577
Investment advisory income .......................... 594 630
Loan fee income ..................................... 561 421
Bank owned life insurance income .................... 557 488
Mortgage banking activities, net .................... 72 22
Other income ........................................ 864 740
------- -------
10,733 9,038
------- -------
NONINTEREST EXPENSES:
Salaries, benefits and other compensation ........... 10,850 9,192
Occupancy expense ................................... 1,832 1,300
Equipment expense ................................... 1,246 982
Data processing and operations expenses ............. 943 857
Marketing expense ................................... 742 613
Professional fees ................................... 653 257
Other operating expense ............................. 3,092 3,041
------- -------
19,358 16,242
------- -------
Income before minority interest and taxes ................ 12,064 11,411
Less minority interest ................................... - 16
------- -------
Income before taxes ...................................... 12,064 11,395
Income tax provision ..................................... 4,283 4,054
------- -------
NET INCOME ............................................... $ 7,781 $ 7,341
======= =======
EARNINGS PER SHARE:
Basic ................................................. $ 1.19 $ 1.11
Diluted ............................................... $ 1.15 $ 1.06
The accompanying notes are an integral part of these Financial Statements.
3
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, December 31,
2007 2006
---- ----
(Unaudited)
(In Thousands, Except Share Data)
ASSETS
Cash and due from banks .................................................. $ 75,461 $ 73,989
Cash in non-owned ATMs ................................................... 150,270 166,092
Federal funds sold ....................................................... - 1,500
Interest-bearing deposits in other banks ................................. 130 243
----------- -----------
Total cash and cash equivalents ...................................... 225,861 241,824
Investment securities held-to-maturity ................................... 4,215 4,219
Investment securities available-for-sale including reverse mortgages ..... 23,938 50,272
Mortgage-backed securities available-for-sale ............................ 487,705 504,347
Mortgage-backed securities trading ....................................... 12,364 12,364
Loans held-for-sale ...................................................... 1,211 919
Loans, net of allowance for loan losses of $27,629 at March 31, 2007
and $27,384 at December 31, 2006 ....................................... 2,031,126 2,018,822
Bank-owned life insurance ................................................ 55,839 55,282
Stock in Federal Home Loan Bank of Pittsburgh, at cost ................... 35,217 39,872
Assets acquired through foreclosure ...................................... 388 388
Premises and equipment ................................................... 32,889 30,218
Accrued interest receivable and other assets ............................. 36,785 38,869
----------- -----------
TOTAL ASSETS ............................................................. $ 2,947,538 $ 2,997,396
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing demand ........................................... $ 283,295 $ 276,338
Interest-bearing demand .............................................. 148,946 146,719
Money market ......................................................... 324,192 246,645
Savings .............................................................. 219,904 226,853
Time ................................................................. 337,605 326,009
Jumbo certificates of deposit - customer ............................. 127,258 121,142
----------- -----------
Total customer deposits ............................................ 1,441,200 1,343,706
Other jumbo certificates of deposit .................................. 99,593 111,388
Brokered deposits .................................................... 292,470 301,254
----------- -----------
Total deposits ..................................................... 1,833,263 1,756,348
Federal funds purchased and securities sold under agreements
to repurchase........................................................... 50,000 73,400
Federal Home Loan Bank advances .......................................... 693,918 784,028
Trust preferred borrowings ............................................... 67,011 67,011
Other borrowed funds ..................................................... 76,228 78,240
Accrued interest payable and other liabilities ........................... 27,931 26,256
----------- -----------
TOTAL LIABILITIES ........................................................ 2,748,351 2,785,283
----------- -----------
MINORITY INTEREST ........................................................ 45 54
STOCKHOLDERS' EQUITY:
Serial preferred stock $.01 par value, 7,500,000 shares authorized; none
issued and outstanding ............................................... - -
Common stock $.01 par value, 20,000,000 shares authorized; issued
15,607,423 at March 31, 2007 and 15,584,580 at December 31, 2006 ..... 156 156
Capital in excess of par value ........................................... 83,084 81,580
Accumulated other comprehensive loss ..................................... (6,570) (8,573)
Retained earnings ........................................................ 356,686 347,448
Treasury stock at cost, 9,324,469 shares at March 31, 2007 and 8,942,969
shares at December 31, 2006 .......................................... (234,214) (208,552)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ............................................... 199,142 212,059
----------- -----------
TOTAL LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY ............ $ 2,947,538 $ 2,997,396
=========== ===========
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,
----------------------------
2007 2006
---- ----
(Unaudited)
(In Thousands)
OPERATING ACTIVITIES:
Net income ...................................................................... $ 7,781 $ 7,341
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses ................................................... 371 688
Depreciation, accretion and amortization .................................... 1,709 781
Decrease (increase) in accrued interest receivable and other assets ......... 2,113 (684)
Origination of loans held-for-sale .......................................... (9,170) (4,019)
Proceeds from sales of loans held-for-sale .................................. 8,867 2,682
Gain on mortgage banking activity ........................................... (72) (22)
Stock-based compensation expense (net of tax benefit recognized) ............ 221 286
Excess tax benefits from share-based payment arrangements ................... (144) (215)
Minority interest net income ................................................ - 16
Increase in accrued interest payable and other liabilities .................. 1,819 3,047
Loss on sale of assets acquired through foreclosure ......................... - 1
Increase in value of bank-owned life insurance .............................. (557) (488)
Increase in capitalized interest, net ....................................... (1,359) (311)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES ....................................... 11,579 9,103
----------- -----------
INVESTING ACTIVITIES:
Maturities of investment securities ............................................. 25,010 180
Sale of investment securities available-for-sale ................................ 10,000 11,000
Purchase of investments available-for-sale ...................................... (7,487) (11,991)
Repayments of mortgage-backed securities available-for-sale ..................... 19,844 26,773
Purchases of mortgage-backed securities available-for-sale ...................... - (44,793)
Repayments of reverse mortgages ................................................. 972 125
Disbursements for reverse mortgages ............................................. (686) (207)
Purchase of Cypress Capital Management LLC ...................................... (240) (466)
Sale of loans ................................................................... - 183
Purchase of loans ............................................................... - (3,305)
Net increase in loans ........................................................... (12,682) (100,002)
Net decrease (increase) in stock of Federal Home Loan Bank of Pittsburgh ........ 4,655 (255)
Sales of assets acquired through foreclosure, net ............................... - 14
Investment in premise and equipment, net ........................................ (3,142) (2,938)
----------- -----------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES ............................ 36,244 (125,682)
----------- -----------
FINANCING ACTIVITIES:
Net increase in demand and savings deposits ..................................... 77,770 17,945
Net (decrease) increase in time deposits ........................................ (3,093) 102,563
Net decrease in securities sold under agreement to repurchase ................... (23,400) (9,750)
Receipts from FHLB advances ..................................................... 2,971,955 2,224,375
Repayments of FHLB advances ..................................................... (3,062,065) (2,234,563)
Dividends paid on common stock .................................................. (532) (462)
Issuance of common stock and exercise of employee stock options ................. 1,106 996
Excess tax benefits from share-based payment arrangements ....................... 144 215
Purchase of treasury stock, net of reissuance ................................... (25,662) (765)
Decrease in minority interest ................................................... (9) (150)
----------- -----------
NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES ............................ (63,786) 100,404
----------- -----------
Decrease in cash and cash equivalents ........................................... (15,963) (16,175)
Cash and cash equivalents at beginning of period ................................ 241,824 233,951
----------- -----------
Cash and cash equivalents at end of period ...................................... $ 225,861 $ 217,776
=========== ===========
(Continued on next page)
5
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
Three months ended March 31,
----------------------------
2007 2006
---- ----
(Unaudited)
(In Thousands)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
------------------------------------------------
Cash paid in interest during the period..................................... $ 22,529 $ 18,946
Cash paid for income taxes, net............................................. 1,227 1,200
Net change in accumulated other comprehensive loss ......................... 2,003 (5,069)
Transfer of loans held-for-sale to loans.................................... - 281
The accompanying notes are an integral part of these Financial Statements.
6
WSFS FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(UNAUDITED)
1. BASIS OF PRESENTATION
Our consolidated Financial Statements include the accounts of WSFS
Financial Corporation ("the Company", "our Company", "we", "our" or "us"),
Wilmington Savings Fund Society, FSB ("WSFS Bank" or the "Bank") and Montchanin
Capital Management, Inc. ("Montchanin") and its wholly owned subsidiary, Cypress
Capital Management, LLC ("Cypress"). Cypress is a Wilmington based investment
advisory firm servicing high net-worth individuals and institutions. We also
have one unconsolidated affiliate, WSFS Capital Trust III ("the Trust"). We also
have a passive minority ownership interest in a limited partnership created to
develop the office building in which we are a tenant. Founded in 1832, we are
one of the ten oldest banks continuously operating under the same name in the
United States. We provide residential and commercial real estate, commercial and
consumer lending services, as well as retail deposit and cash management
services. In addition, we offer a variety of wealth management and personal
trust services through the Bank's new division, Wilmington Advisors, which was
formed during 2006. Lending activities are funded primarily with retail deposits
and borrowings. The Federal Deposit Insurance Corporation ("FDIC") insures our
customers'deposits to their legal maximum. We serve customers from our main
office, 29 retail banking offices, loan production offices and operations
centers located in Delaware and southeastern Pennsylvania. Montchanin was formed
in 2003 to provide asset management products and services in the Bank's primary
market area. The Trust was formed in 2005 to issue Pooled Floating Rate Capital
Securities. The Trust invested all of the proceeds from the issuance of the
Pooled Floating Rate Capital Securities in our Junior Subordinated Debentures.
Our fully-owned and consolidated subsidiaries include WSFS Investment
Group, Inc. and WSFS Reit, Inc. WSFS Investment Group, Inc. markets various
third-party insurance products and securities directly to the public and through
the Bank's retail banking system. WSFS Reit, Inc. is a real estate investment
trust formed to hold qualifying real estate assets and may be used to raise
capital in the future.
Our accounting and reporting policies conform with U.S. generally
accepted accounting principles and prevailing practices within the banking
industry for interim financial information and Rule 10-01 of Regulation S-X. Per
Rule 10-01 of Regulation S-X, we are not required to include all information and
notes for complete financial statements and prevailing practices within the
banking industry. Operating results for the three month period ended March 31,
2007 are not necessarily indicative of the results that may be expected for any
future quarters or for the year ending December 31, 2007. For further
information, refer to the consolidated financial statements and notes thereto
included in our Annual Report of Form 10-K for the year ended December 31, 2006
as filed with the Securities and Exchange Commission.
ACCOUNTING FOR STOCK-BASED COMPENSATION
We adopted Statement of Financial Accounting Standards ("SFAS") No.
123 (revised 2004), Share-Based Payment ("SFAS 123R") beginning January 1, 2006
using the Modified Prospective Application Method. This method relates to
current and future periods and does not require the restatement of prior
periods. The impact of expensing stock options for the three months ended March
31, 2007, was $254,000 (pre-tax) or $0.03 (after-tax) per share, to salaries,
benefits and other compensation. This compares to $333,000 (pre-tax) or $0.04
(after-tax) per share for the three months ended March 31, 2006.
We have stock options outstanding under two plans (collectively, "Stock
Incentive Plans") for officers, directors and Associates of the Corporation and
its subsidiaries. After shareholder approval in 2005, the 1997 Stock Option Plan
("1997 Plan"), was replaced by the 2005 Incentive Plan ("2005 Plan"). No future
awards may be granted under the 1997 Plan. The 2005 Plan will terminate on the
tenth anniversary of its effective date, after which no awards may be granted.
The number of shares reserved for issuance under the 2005 Plan is 400,000. At
March 31, 2007, there were 37,924 shares available for future grants under the
2005 Plan. At the April 2007 Annual Meeting of Shareholders a proposal was
approved that increased the number of shares available for issuance by 462,000.
The Stock Incentive Plans provide for the granting of incentive stock
options as defined in Section 422 of the Internal Revenue Code as well as
nonincentive stock options (collectively, "Stock Options"). Additionally, the
2005 Plan provides for the granting of stock appreciation rights, performance
awards, restricted stock and restricted stock unit awards, deferred stock units,
dividend equivalents, other stock-based awards and cash awards. All Stock
Options are to be granted at not less than the market price of the Corporation's
common stock on the date of the grant. All Stock Options granted during 2007
vest in 20% or 25% per annum increments, start to become exercisable one year
from the grant date and expire between five and ten years from the grant date.
Generally, all awards become immediately exercisable in the event of a change in
control and termination without cause or constructive termination of the
Associate.
We announced on April 18, 2007, that our Executive Committee of the
Board of Directors adopted an administrative policy related to the future award
of stock options under the 2005 Plan. Under such administrative policy, the
future award of stock options under the 2005 Plan will have a minimum vesting
period of four years and maximum option life of five years from the date of
grant.
7
A summary of the status of our Option Plans and changes during the
quarter then ended is presented below:
MARCH 2007 MARCH 2006
--------------------------- ---------------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ -------------- ------ --------------
STOCK OPTIONS:
Outstanding at beginning of period 700,427 $ 39.50 739,404 $ 31.88
Granted 4,980 69.00 6,720 62.48
Exercised (16,043) 34.46 (17,890) 24.05
Forfeited or canceled (1,750) 54.57 (776) 39.83
-------- --------
Outstanding at end of period 687,614 39.80 727,458 32.35
Exercisable at end of period 406,673 26.61 424,114 20.52
Weighted-average fair value
of stock options granted $ 14.95 $ 15.96
Beginning January 1, 2007, 414,973 stock options were exercisable with an
intrinsic value of $15.6 million. In addition, at January 1, 2007, there were
285,454 nonvested options with a grant date fair value of $12.74. During the
first quarter of 2007, 8,268 options vested with an intrinsic value of $271,000,
and a grant date fair value of $7.98 per option. Also during the quarter, 16,043
options were exercised with an intrinsic value of $534,000. In addition, 525
vested options were forfeited with an intrinsic value of $11,000 and a grant
date fair value of $10.61, while 1,750 options were forfeited in total with a
grant date fair value of $13.46. There were 406,673 exercisable options
remaining at March 31, 2007, with an intrinsic value of $15.4 million and a
remaining contractual term of 4.6 years. At March 31, 2007 there were 687,614
stock options outstanding with an intrinsic value of $17.1 million and a
remaining contractual term of 4.9 years. During the first quarter of 2006,
17,890 options were exercised with an intrinsic value of $694,000 and 7,860
options vested with a fair value of $7.30 per option.
The total amount of compensation cost related to nonvested stock options as
of March 31, 2007 was $2.0 million. The weighted-average period over which it is
expected to be recognized is 1.5 years. We issue new shares upon the exercise of
options.
During the first quarter of 2007, we granted 4,925 options with a five-year
life and a four-year vesting period. The Black-Scholes option-pricing model was
used to determine the grant date fair value of options. Significant assumptions
used in the model included a weighted-average risk-free rate of return of 4.7%
in 2007; an expected option life of three and three-quarter years; and an
expected stock price volatility of 18.7% in 2007. For the purposes of this
option-pricing model, a dividend yield of 0.5% was assumed.
Also during the first quarter of 2007, we granted 55 options with a
ten-year life and a five-year vesting period. The Black-Scholes option-pricing
model was used to determine the grant date fair value of options. Significant
assumptions used in the model included a weighted-average risk-free rate of
return of 4.7% in 2007; an expected option life of six and one-half years; and
an expected stock price volatility of 21.1% in 2007. For the purposes of this
option-pricing model, a dividend yield of 0.5% was assumed.
Prior to adoption of SFAS 123R we used a graded-vesting schedule to
calculate the expense related to stock options. Since the adoption of SFAS 123R
we have used a straight-line schedule to calculate the expense related to new
stock options issued.
The Black-Scholes option-pricing model assumes that options are freely
tradable and immediately vested. Since options are not transferable, have
vesting provisions, and are subject to trading blackout periods imposed by us,
the value calculated by the Black-Scholes model may significantly overstate the
true economic value of the options.
During the first quarter of 2007 and 2006 we issued 27 and 8 shares,
respectively, of restricted stock. These awards vest over five years: 0% during
the first two years, 25% at the end of each of the third and fourth years and
50% at the end of the fifth year.
8
2. EARNINGS PER SHARE
The following table shows the computation of basic and diluted earnings
per share:
For the three months ended March 31,
------------------------------------
2007 2006
---- ----
(In Thousands, Except Per Share Data)
NUMERATOR:
---------
Net income ...................................................................... $7,781 $7,341
====== ======
DENOMINATOR:
-----------
Denominator for basic earnings per share - weighted average outstanding shares... 6,542 6,601
Effect of dilutive employee stock options ....................................... 217 304
------ ------
Denominator for diluted earnings per share - adjusted weighted average
outstanding shares and assumed exercise ....................................... 6,759 6,905
====== ======
Basic earnings per share ............................................................ $ 1.19 $ 1.11
====== ======
Diluted earnings per share .......................................................... $ 1.15 $ 1.06
====== ======
Outstanding common stock equivalents having no dilutive effect ...................... 5 100
3. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
We have an interest-rate cap with a notional amount of $50.0 million,
which limits three-month London InterBank Offered Rate ("LIBOR") to 6.00% for
the ten years ending December 1, 2008. The fair value of the cap is estimated
using a standard option model. The fair value of the interest rate cap at March
31, 2007 was $13,000. The cap is considered a free standing derivative and all
changes in the fair value of the cap is recorded in the Statement of Operations.
During the first quarter of 2007, we recognized $17,000 of related interest
expense.
4. COMPREHENSIVE INCOME
The following schedule reconciles net income to total comprehensive
income as required by SFAS No. 130, Reporting Comprehensive Income:
For the three months
ended March 31,
--------------------
(In Thousands)
2007 2006
------- -------
Net income ...................................... $ 7,781 $ 7,341
Other Comprehensive Income:
Unrealized holding gains (losses) on securities
available-for-sale arising during the
period ..................................... 3,231 (8,203)
Tax (expense) benefit ........................... (1,228) 3,117
------- -------
Net of tax amount ............................... 2,003 (5,086)
Unrealized holding gains arising during the
period on derivatives ...................... - 26
Tax expense ..................................... - (9)
------- -------
Net of tax amount ............................... - 17
Total comprehensive income ...................... $ 9,784 $ 2,272
======= =======
5. TAXES ON INCOME
We account for income taxes in accordance with SFAS No. 109, Accounting
for Income Taxes, which requires the recording of deferred income taxes that
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. We have assessed valuation allowances on
the
9
deferred income taxes due to, among other things, limitations imposed by
Internal Revenue Code and uncertainties, including the timing of settlement and
realization of these differences.
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement 109 ("FIN 48"). FIN 48 prescribes a recognition
threshold and a measurement attribute for the financial statement recognition
and measurement of tax positions taken or expected to be taken in a tax return.
Benefits from tax positions are recognized in the financial statements only when
it is more-likely-than-not that the tax position will be sustained upon
examination by the appropriate taxing authority that would have full knowledge
of all relevant information. A tax position that meets the more-likely-than-not
recognition threshold is measured at the largest amount of benefit that is
greater than fifty-percent likely of being realized upon ultimate settlement.
Tax positions that previously failed to meet the more-likely-than-not
recognition threshold are recognized in the first subsequent financial reporting
period in which that threshold is met. Previously recognized tax positions that
no longer meet the more-likely-than-not recognition threshold are derecognized
in the first subsequent financial reporting period in which that threshold is no
longer met. FIN 48 also provides guidance on the accounting for and disclosure
of unrecognized tax benefits, interest and penalties. FIN 48 became effective
for us on January 1, 2007, and resulted in a $2.0 million increase to our
retained earnings during the quarter ended March 31, 2007.
The total amount of unrecognized tax benefits as of January 1, 2007 was
$2.2 million, all of which would affect our effective tax rate if recognized.
The total amount of accrued interest and penalties associated with such
unrecognized tax benefits were $400,000 and $0, respectively. We record interest
and penalties on potential income tax deficiencies as income tax expense. We do
not expect the total amount of unrecognized tax benefits will significantly
change within the next twelve months. Federal tax years 2003 through 2006 remain
subject to examination as of January 1, 2007, while tax years 2003 through 2006
remain subject to examination by state taxing jurisdictions.
6. SEGMENT INFORMATION
Under the definition of SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, we have three operating segments at March
31, 2007: There is one segment for WSFS and one for CashConnect, the ATM
division of WSFS. The third segment, "All Others", represents the combined
contributions of Montchanin, WSFS Investment Group, Inc., and the newly formed
Wealth Management Services Division. Montchanin, WSFS Investment Group, Inc.,
and the Wealth Management Services Division each offer different products, to a
separate customer base, through distinct distribution methods. We have combined
Montchanin, WSFS Investment Group, Inc., and the Wealth Management Services
Division to form the operating segment "All Others". All prior years'
information has been updated to reflect this presentation.
The WSFS segment provides financial products through its banking
offices to commercial and retail customers.
The CashConnect segment provides turnkey ATM services through strategic
partnerships with several of the largest networks, manufacturers, and service
providers in the ATM industry. The balance sheet category "Cash in non-owned
ATMs" includes cash in which fee income is earned through bailment arrangements
with customers of CashConnect. Bailment arrangements are typically renewed
annually. On May 1, 2007 CashConnect entered into an agreement to purchase
certain ATM related assets of another bank, principally its customer list and
rights and obligations under its customer contracts. Although most rights and
obligations were assigned to CashConnect as part of this transaction the seller
has retained the right to continue to supply ATM cash in accordance with the
needs of its former customers for a minimum of thirty months.
Montchanin provides asset management products and services to customers
in the Bank's primary market area. Montchanin has one consolidated wholly-owned
subsidiary, Cypress Capital Management, LLC ("Cypress"). Cypress is a
Wilmington-based investment advisory firm serving high net-worth individuals and
institutions. WSFS Investment Group, Inc. markets various third-party insurance
products and securities directly to the public and through WSFS' retail banking
system. The Wealth Management Services Division provides wealth management and
personal trust services to customers in the Bank's primary market area.
An operating segment is a component of an enterprise that engages in
business activities from which it may earn revenues and incur expenses, whose
operating results are regularly reviewed by the enterprise's chief operating
decision makers to make decisions about resources to be allocated to the segment
and assess its performance, and for which discrete financial information is
available. We evaluate performance based on pretax ordinary income relative to
resources used, and allocate resources based on these results. Segment
information for the three months ended March 31, 2007 and 2006 follows:
10
For the Three Months Ended March 31,
-------------------------------------------------------------------------------------------------
2007 2006
-------------------------------------------------- --------------------------------------------
ALL ALL
WSFS CASHCONNECT OTHERS (1) TOTAL WSFS CASHCONNECT OTHERS (1) Total
(in Thousands)
External customer revenues:
Interest income $ 47,088 $ - $ - $ 47,088 $ 40,477 $ - $ - $ 40,477
Noninterest income 5,961 3,670 1,102 10,733 4,458 3,458 1,122 9,038
---------- ---------- ---------- ---------- ---------- -------- ------ ----------
Total external customer revenues 53,049 3,670 1,102 57,821 44,935 3,458 1,122 49,515
---------- ---------- ---------- ---------- ---------- -------- ------ ----------
Inter-segment revenues:
Interest income 1,908 - - 1,908 1,708 - - 1,708
Noninterest income 552 153 - 705 467 179 - 646
---------- ---------- ---------- ---------- ---------- -------- ------ ----------
Total inter-segment revenues 2,460 153 - 2,613 2,175 179 - 2,354
---------- ---------- ---------- ---------- ---------- -------- ------ ----------
Total revenue 55,509 3,823 1,102 60,434 47,110 3,637 1,122 51,869
---------- ---------- ---------- ---------- ---------- -------- ------ ----------
External expenses:
Interest expense 26,028 - - 26,028 21,174 - - 21,174
Noninterest expenses 16,788 1,269 1,301 19,358 14,210 913 1,119 16,242
Provision for loan loss 371 - - 371 688 - - 688
---------- ---------- ---------- ---------- ---------- -------- ------ ----------
Total external expenses 43,187 1,269 1,301 45,757 36,072 913 1,119 38,104
---------- ---------- ---------- ---------- ---------- -------- ------ ----------
Inter-segment expenses
Interest expense - 1,908 - 1,908 - 1,708 - 1,708
Noninterest expenses 153 246 306 705 179 230 237 646
---------- ---------- ---------- ---------- ---------- -------- ------ ----------
Total inter-segment expenses 153 2,154 306 2,613 179 1,938 237 2,354
---------- ---------- ---------- ---------- ---------- -------- ------ ----------
Total expenses 43,340 3,423 1,607 48,370 36,251 2,851 1,356 40,458
---------- ---------- ---------- ---------- ---------- -------- ------ ----------
Income before minority
interest and taxes $ 12,169 $ 400 $ (505) $ 12,064 $ 10,859 $ 786 $ (234) $ 11,411
Less minority interest - 16
Income tax provision 4,283 4,054
---------- ----------
Consolidated net income 7,781 7,341
Cash and cash equivalents $ 74,632 $ 150,270 $ 959 $ 225,861 $ 58,132 $159,042 $ 602 $ 217,776
Other segment assets 2,709,955 9,624 2,098 2,721,677 2,721,584 11,531 1,970 2,735,085
---------- ---------- ---------- ---------- ---------- -------- ------ ----------
Total segment assets $2,784,587 $ 159,894 $ 3,057 $2,947,538 $2,779,716 $170,573 $2,572 $2,952,861
========== ========== ========== ========== ========== ======== ====== ==========
Capital expenditures $ 2,719 $ 4 $ 1 $ 2,724 $ 18,597 $ 60 $ 17 $ 18,674
(1) Includes Montchanin Capital Management, Inc., WSFS Investment Group Inc.
and the Wealth Management Services Division.
11
7. INDEMNIFICATIONS AND GUARANTEES
SECONDARY MARKET LOAN SALES. Generally, we do not sell loans with
recourse except to the extent arising from standard loan sale contract
provisions covering violations of representations and warranties and, under
certain circumstances, first payment defaults by borrowers. These are customary
repurchase provisions in the secondary market for conforming mortgage loan
sales. We sell fixed-rate, conforming first mortgage loans to the Freddie Mac as
part of our ongoing asset/liability management program. Loans held-for-sale are
carried at the lower of cost or market of the aggregate or, in some cases
individual loans. Gains and losses on sales of loans are recognized at the time
of the sale.
As is customary in such sales, we provide indemnifications to the
buyers under certain circumstances. These indemnifications may include our
repurchase of the loans. Repurchases and losses are rare, and no provision is
made for losses at the time of sale. From January 2005 through the first quarter
of 2007, we have had no repurchases under these indemnifications.
SWAP GUARANTEES. We entered into agreements with two unrelated
financial institutions whereby those financial institutions entered into
interest rate derivative contracts (interest rate swap transactions) with
customers referred to them by us. By the terms of the agreements, those
financial institutions have recourse to us for any exposure created under each
swap transaction in the event the customer defaults on the swap agreement and
the agreement is in a paying position to the third-party financial institution.
This is a customary arrangement that allows smaller financial institutions, such
as ours, to provide access to interest rate swap transactions for its customers
without creating the swap itself.
At March 31, 2007 there were eighteen variable-rate to fixed-rate swap
transactions between the third party financial institutions and customers of
ours, compared to twenty-two at December 31, 2006. The initial notional amount
aggregated approximately $58.3 million at March 31, 2007 compared with $77.4
million at December 31, 2006, with maturities ranging from approximately one to
ten years. The aggregate market value of these swaps to the customers was a
liability of $820,000 at March 31, 2007 and $291,000 at December 31, 2006. The
amount of liability recorded by us for these guarantees that were in a liability
position at March 31, 2007 and December 31, 2006 was $11,000 and $7,000,
respectively. This amount represented the fair market value of the guarantee to
perform under the terms of the swap agreements.
8. ASSOCIATE (EMPLOYEE) BENEFIT PLANS
POSTRETIREMENT BENEFITS
We share certain costs of providing health and life insurance benefits
to retired Associates (and their eligible dependents). Substantially all
Associates may become eligible for these benefits if they reach normal
retirement age while working for us.
We account for our obligations under the provisions of SFAS No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions ("SFAS
106"). SFAS 106 requires that the costs of these benefits be recognized over an
Associate's active working career. Disclosures for 2007 are in accordance with
SFAS No. 158, Employer's Accounting for Defined Benefit Pension and Other
Postretirement Plans ("SFAS 158") while disclosures for previous years are in
accordance with SFAS No. 132 (Revised), Employers' Disclosure About Pensions and
Other Postretirement Benefits.
The following disclosures of the net periodic benefit cost components
of post-retirement benefits were measured at January 1, 2007 and 2006:
Three months ended March 31,
----------------------------
2007 2006
---- ----
(In Thousands)
Service cost ................................... $34 $27
Interest cost .................................. 31 23
Amortization of transition obligation .......... 15 15
Net loss recognition ........................... 5 -
--- ---
Net periodic benefit cost ..... $85 $65
=== ===
SUPPLEMENTAL PENSION PLAN
We provide a nonqualified supplemental pension plan that gives credit
for 25 years of service based on the qualified plan formula. This plan is
provided to two of our retired executives. The plan is no longer being provided
to our Associates. Unrecognized net gains or losses resulting from experience
different from that assumed and from changes in assumptions is recognized
immediately as a component of net periodic benefit cost.
12
The following disclosures of the net periodic benefit cost components
of a supplemental pension plan were measured at January 1, 2007 and 2006:
Three months ended March 31,
----------------------------
2007 2006
--- ---
(In Thousands)
Interest cost ................................. $10 $11
Net loss recognition ........................... 7 14
--- ---
Net periodic benefit cost ..... $17 $25
=== ===
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
------ FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
WSFS Financial Corporation (`the Company", "our Company", "we", "our"
or "us") is a thrift holding company headquartered in Wilmington, Delaware.
Substantially all of our assets are held by our subsidiary, Wilmington Savings
Fund Society, FSB ("WSFS Bank" or the "Bank"). Founded in 1832, we are one of
the ten oldest banks continuously operating under the same name in the United
States. As a federal savings bank, which was formerly chartered as a state
mutual savings bank, the Bank enjoys enjoy broader investment powers than most
other financial institutions. We have served the residents of the Delaware
Valley for 175 years. We are the largest thrift institution headquartered in
Delaware and the fourth largest financial institution in the state on the basis
of total deposits traditionally garnered in-market. Our primary market area is
the mid-Atlantic region of the United States, which is characterized by a
diversified manufacturing and service economy. Our long-term business strategy
is to serve small and mid-size businesses through loans, deposits, investments,
and related financial services, and to gather retail core deposits. Our
strategic focus is to exceed customer expectations, deliver stellar service and
build customer advocacy through highly trained, relationship oriented, friendly,
knowledgeable, and empowered Associates.
We provide residential and commercial real estate, commercial and
consumer lending services, as well as retail deposit and cash management
services. In addition, we offer a variety of wealth management and personal
trust services through the Bank's new division, Wilmington Advisors, which was
formed during 2006. Lending activities are funded primarily with retail deposits
and borrowings. The Federal Deposit Insurance Corporation ("FDIC") insures our
customers' deposits to their legal maximum. We serve customers from our main
office and 28 retail banking offices, loan production offices and operations
centers located in Delaware and southeastern Pennsylvania.
We have two consolidated subsidiaries, WSFS Bank and Montchanin Capital
Management, Inc. ("Montchanin"). We also have one unconsolidated affiliate,
WSFS Capital Trust III. We also have a passive minority ownership interest in a
limited partnership created to develop the office building in which we are a
tenant. Fully-owned consolidated subsidiaries of WSFS include WSFS Investment
Group, Inc. which markets various third-party insurance products and securities
directly to the public and through the Banks' retail banking system, and WSFS
Reit, Inc., which holds qualifying real estate assets and may be used in the
future to raise capital.
Montchanin has one consolidated wholly-owned subsidiary, Cypress
Capital Management, LLC ("Cypress"). Cypress is a Wilmington-based investment
advisory firm serving high net-worth individuals and institutions. Cypress has
more than $458 million in assets under management at March 31, 2007.
FORWARD-LOOKING STATEMENTS
Within this report and financial statements, management has included
certain "forward-looking statements" concerning our future operations. It is
management's desire to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. This statement is for the
express purpose of availing the Company of the protections of such safe harbor
with respect to all "forward-looking statements" contained in its financial
statements. Management has used "forward-looking statements" to describe the
future plans and strategies including expectations of our future financial
results. Management's ability to predict results or the effect of future plans
and strategy is inherently uncertain. Factors that could affect results include
interest rate trends, competition, the general economic climate in Delaware, the
mid-Atlantic region and the country as a whole, asset quality, loan growth, loan
delinquency rates, operating risk, uncertainty of estimates in general and
changes in federal and state regulations, among other factors. These factors
should be considered in evaluating the "forward-looking statements," and undue
reliance should not be placed on such statements. Actual results may differ
materially from management expectations. We do not undertake, and specifically
disclaim any obligation to publicly release the result of any revisions that may
be made to any forward-looking statements to reflect the occurrence of
anticipated or unanticipated events or circumstances after the date of such
statements.
CRITICAL ACCOUNTING POLICIES
The discussion and analysis of the financial condition and results of
operations are based on the Consolidated Financial Statements, which are
prepared in conformity with U.S. generally accepted accounting principles. The
preparation of these Financial Statements requires management to make estimates
and assumptions affecting the reported amounts of assets, liabilities, revenue
and expenses. Management evaluates these estimates and assumptions on an ongoing
basis, including those related to the allowance for loan losses, contingencies
(including indemnifications), and deferred taxes. Management bases its estimates
on historical experience and various other factors and assumptions that are
believed to be reasonable under the circumstances. These form the basis for
making judgments on the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
14
The following are critical accounting policies that involve more
significant judgments and estimates:
ALLOWANCE FOR LOAN LOSSES
We maintain allowances for credit losses and charge losses to these allowances
when realized. The determination of the allowance for loan losses requires
significant judgment reflecting management's best estimate of probable loan
losses related to specifically identified loans as well as those in the
remaining loan portfolio. Management's evaluation is based upon a continuing
review of these portfolios.
CONTINGENCIES (INCLUDING INDEMNIFICATIONS)
In the ordinary course of business we are subject to legal actions
which involve claims for monetary relief. Based upon information presently
available to us and our counsel, it is our opinion that any legal and financial
responsibility arising from such claims will not have a material adverse effect
on our results of operations.
We maintain a loss contingency for standby letters of credit and charge
losses to this reserve when such losses are realized. The determination of the
loss contingency for standby letters of credit requires significant judgment
reflecting management's best estimate of probable losses. The balance in this
reserve at March 31, 2007 was $623,000.
The Bank, as successor to originators of reverse mortgages is, from
time to time, involved in arbitration or litigation with various parties
including borrowers or the heirs of borrowers. There can be no assurances about
how the courts or arbitrators may apply existing legal principles to the
interpretation and enforcement of the terms and conditions of the Bank's reverse
mortgage obligations.
INCOME TAXES
We account for income taxes in accordance with Statement of Financial
Account Standards ("SFAS") No. 109, Accounting for Income Taxes ("SFAS 109"),
which requires the recording of deferred income taxes that reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. Management has assessed the Company's valuation allowances on deferred
income taxes resulting from, among other things, limitations imposed by Internal
Revenue Code and uncertainties, including the timing of settlement and
realization of these differences. We adopted Financial Accounting Standards
Board ("FASB") Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement 109 ("FIN 48") on January 1, 2007.
The impact of the adoption of this interpretation is more fully discussed in
Note 5 to the consolidated financial statements.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
FINANCIAL CONDITION
Our total assets decreased $49.9 million, or 2% during the three months
ended March 31, 2007. There was a $26.3 million, or 48% decrease of investment
securities due primarily to $25.0 million in agency notes maturing during the
quarter. Mortgage-backed securities decreased $16.6 million, or 3%, due to
repayments. In addition, between December 31, 2006 and March 31, 2007, cash in
non-owned ATMs decreased $15.8 million, or 10%. The decrease is attributable to
the higher cash balances required for ATMs during the fourth quarter of 2006,
due to seasonal demand. Partially offsetting these decreases was a $12.3 million
increase in loans, primarily commercial and commercial real estate loans.
Total liabilities decreased $36.9 million between December 31, 2006 and
March 31, 2007, to $2.7 billion. The decrease was mainly due to a $90.1 million
or 11% reduction in Federal Home Loan Bank ("FHLB") advances. This decline in
FHLB advances was mainly due to using excess funds from mortgage-backed security
repayments to repay advances. There was also a decrease of $23.4 million or 32%
in federal funds purchased and securities sold under agreements to repurchase.
These decreases were offset by a $76.9 million, or 4% increase in deposits. This
increase included $77.5 million in money market accounts and $17.7 million in
customer time deposits.
CAPITAL RESOURCES
Stockholders' equity decreased $12.9 million between December 31, 2006
and March 31, 2007. This decrease was mainly due to our purchase of 381,500
shares of our common stock for $25.7 million ($67.27 per share average). At
March 31, 2007 we held 9.3 million shares of common stock in our treasury at a
cost of $234.2 million. Finally, we declared a cash dividend totaling $532,000
during the three months ended March 31, 2007. These decreases were partially
offset by net income of $7.8 million and an increase of
15
$1.5 million from the issuance of common stock and exercise of employee stock
options. Accumulated other comprehensive income increased $2.0 million during
the first three months of 2007 due, in part, to an increase in the fair value of
securities available-for-sale. In addition, stockholders' equity increased $2.0
million as a result of the implementation of the FIN 48. The impact of the
adoption of this interpretation is more fully discussed in Note 5 to the
Consolidated Financial Statements.
Below is a table comparing the Bank's consolidated capital position to
the minimum regulatory requirements as of March 31, 2007 (dollars in thousands):
To be Well-Capitalized
Consolidated For Capital Under Prompt Corrective
Bank Capital Adequacy Purposes Action Provisions
------------------------- ---------------------- ------------------------
% of % of % of
Amount Assets Amount Assets Amount Assets
------ ------ ------ ------ ------ ------
Total Capital
(to Risk-Weighted Assets) ........ $291,732 12.91% $180,771 8.00% $225,964 10.00%
Core Capital (to Adjusted
Total Assets)..................... 264,338 8.96 117,988 4.00 147,485 5.00
Tangible Capital (to Tangible
Assets) .......................... 264,338 8.96 44,245 1.50 N/A N/A
Tier 1 Capital (to Risk-Weighted
Assets)........................... 264,338 11.70 90,386 4.00 135,578 6.00
Under Office of Thrift Supervision ("OTS") capital regulations, savings
institutions such as our bank must maintain "tangible" capital equal to 1.5% of
adjusted total assets, "core" capital equal to 4.0% of adjusted total assets,
"Tier 1" capital equal to 4.0% of risk weighted assets and "total" or
"risk-based" capital (a combination of core and "supplementary" capital) equal
to 8.0% of risk-weighted assets. Failure to meet minimum capital requirements
can initiate certain mandatory actions and possibly additional discretionary
actions by regulators that, if undertaken, could have a direct material effect
on our bank's financial statements. At March 31, 2007 the Bank was in compliance
with regulatory capital requirements and is considered a "well-capitalized"
institution.
LIQUIDITY
We manage our liquidity risk and funding needs through our treasury
function and our Asset/Liability Committee. We have a policy that separately
addresses liquidity, and management monitors our adherence to policy limits.
Also, liquidity risk management is a primary area of examination by the OTS. We
comply with guidance promulgated under Thrift Bulletin 77 that requires thrift
institutions to maintain adequate liquidity to assure safe and sound operations.
As a financial institution, the Bank has ready access to several
sources to fund growth and meet its liquidity needs. Among these are: net
income, deposit programs, loan repayments, borrowing from the FHLB, repurchase
agreements and the brokered deposit market. The Bank's branch expansion is
intended to enter us into new, but contiguous, markets, attract new customers
and provide funding for its business loan growth. In addition, we have a large
portfolio of high-quality, liquid investments, primarily short-duration,
AAA-rated, mortgage-backed securities and Agency notes that are positioned to
provide a near-continuous source of cash flow to meet current cash needs, or can
be sold to meet larger discrete needs for cash. Management believes these
sources are sufficient to maintain the required and prudent levels of liquidity.
During the three months ended March 31, 2007, net loan growth resulted
in the use of $12.7 million in cash. The loan growth was primarily the result of
the successful implementation of specific strategies designed to increase
corporate and small business lending. While our loan to deposit ratio has been
well above 100% for many years, management has significant experience managing
its funding needs through borrowings, primarily through the FHLB.
During the three months ended March 31, 2007, $11.6 million in cash was
provided by operating activities, while $77.8 million in cash was provided
through the net increase in demand and savings deposits and $90.1 million in
cash was used to fund the net decrease in FHLB borrowings. During this period,
cash and cash equivalents decreased $16.0 million to $225.9 million.
NONPERFORMING ASSETS
The following table shows our nonperforming assets and past due loans
at the dates indicated. Nonperforming assets include nonaccruing loans,
nonperforming real estate investments and assets acquired through foreclosure.
Nonaccruing loans are those on which the accrual of interest has ceased. Loans
are placed on nonaccrual status immediately if, in the opinion of management,
collection is doubtful, or when principal or interest is past due 90 days or
more and the value of the collateral is insufficient to cover principal and
16
interest. Interest accrued but not collected at the date a loan is placed on
nonaccrual status is reversed and charged against interest income. In addition,
the amortization of net deferred loan fees is suspended when a loan is placed on
nonaccrual status. Subsequent cash receipts are applied either to the
outstanding principal balance or recorded as interest income, depending on
management's assessment of the ultimate collectibility of principal and
interest. Past due loans are loans contractually past due 90 days or more as to
principal or interest payments but which remain on accrual status because they
are considered well secured and in the process of collection.
MARCH 31, DECEMBER 31,
2007 2006
------ ------
(In Thousands)
Nonaccruing loans:
Commercial ..............................................$ 1,307 $1,282
Consumer ................................................. 528 557
Commercial mortgage ...................................... 577 500
Residential mortgage ..................................... 1,818 1,493
Construction ............................................. - -
------ ------
Total nonaccruing loans ....................................... 4,230 3,832
Assets acquired through foreclosure ........................... 388 388
------ ------
Total nonperforming assets .................................... $4,618 $4,220
====== ======
Past due loans:
Residential mortgages .................................... $ - $ 219
Commercial and commercial mortgages ...................... 40 3
Consumer ................................................. 49 29
------ ------
Total past due loans .......................................... $ 89 $ 251
====== ======
Ratios:
Nonaccruing loans to total loans (1) ..................... 0.21% 0.19%
Allowance for loan losses to gross loans (1) ............. 1.34% 1.34%
Nonperforming assets to total assets ..................... 0.16% 0.14%
Loan loss allowance to nonaccruing loans (2) ............. 648% 705%
Loan and foreclosed asset allowance to total
nonperforming assets (2) ............................... 593% 640%
(1) Total loans exclude loans held for sale.
(2) The applicable allowance represents general valuation allowances only.
Nonperforming assets increased $398,000 between December 31, 2006 and
March 31, 2007. The increase in nonperforming assets was primarily due to a
$325,000 increase in residential mortgages, including the addition of seven
residential mortgage loans, and a $77,000 increase in commercial mortgages. The
level on nonperforming consumer loans improved slightly in comparison to
year-end 2006. An analysis of the change in the balance of non-performing assets
is presented below.
FOR THE THREE
MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, 2007 DECEMBER 31, 2006
-------------- ------------------
(In Thousands)
Beginning balance.................................. $4,220 $3,469
Additions .................................... 1,054 5,697
Collections................................... (540) (3,916)
Transfers to accrual/restructured status...... (71) (453)
Charge-offs / write-downs, net................ (45) (577)
------- ------
Ending balance..................................... $4,618 $4,220
====== ======
The timely identification of problem loans is a key element in our
strategy to manage our loan portfolio. Timely identification enables us to take
appropriate action and, accordingly, minimize losses. An asset review system
established to monitor the asset quality of our loans and investments in real
estate portfolios facilitates the identification of problem assets. In general,
this system utilizes guidelines established by federal regulation. However,
there can be no assurance that the levels or the categories of problem loans and
assets established by the Bank are the same as those which would result from a
regulatory examination.
17
INTEREST SENSITIVITY
The matching of maturities or repricing periods of interest
rate-sensitive assets and liabilities to promote a favorable interest rate
spread and mitigate exposure to fluctuations in interest rates is our primary
tool for achieving our asset/liability management strategies. Management
regularly reviews our interest-rate sensitivity and adjusts the sensitivity
within acceptable tolerance ranges established by management. At March 31, 2007,
interest-bearing liabilities exceeded interest-earning assets that mature or
reprice within one year (interest-sensitive gap) by $51.4 million. Our
interest-sensitive assets as a percentage of interest-sensitive liabilities
within the one-year window decreased from 98% at December 31, 2006 to 97% at
March 31, 2007. Likewise, the one-year interest-sensitive gap as a percentage of
total assets changed to -1.74% at March 31, 2007 from -1.03% at December 31,
2006. The change in sensitivity since December 31, 2006 is the result of the
current interest rate environment and our continuing effort to effectively
manage interest rate risk.
Market risk is the risk of loss from adverse changes in market prices
and rates. Our market risk arises primarily from interest rate risk inherent in
its lending, investing, and funding activities. To that end, management actively
monitors and manages its interest rate risk exposure. One measure, required to
be performed by OTS-regulated institutions, is the test specified by OTS Thrift
Bulletin No. 13a "Management of Interest Rate Risk, Investment Securities and
Derivative Activities." This test measures the impact of an immediate change in
interest rates in 100 basis point increments on the net portfolio value ratio.
The net portfolio value ratio is defined as the net present value of the
estimated cash flows from assets and liabilities as a percentage of net present
value of cash flows from total assets (or the net present value of equity). The
table below shows the estimated impact of immediate changes in interest rates on
our net interest margin and net portfolio value ratio at the specified levels at
March 31, 2007 and 2006, calculated in compliance with Thrift Bulletin No. 13a:
AT MARCH 31,
----------------------------------------------------------------
2007 2006
------------------------------ -----------------------------
CHANGE IN % CHANGE IN % CHANGE IN
INTEREST RATE NET INTEREST NET PORTFOLIO NET INTEREST NET PORTFOLIO
(BASIS POINTS) MARGIN (1) VALUE RATIO (2) MARGIN (1) VALUE RATIO (2)
-------------- ---------- --------------- ---------- ---------------
+300 0% 8.46% -1% 7.12%
+200 0% 8.73% 0% 7.77%
+100 0% 8.95% 0% 8.38%
0 0% 9.70% 0% 8.90%
-100 2% 9.25% -1% 9.35%
-200 2% 9.16% -3% 9.40%
-300 1% 9.13% -7% 9.28%
(1) The percentage difference between net interest margin in a stable interest
rate environment and net interest margin as projected under the various
rate change environments.
(2) The net portfolio value ratio of the Company in a stable interest rate
environment and the net portfolio value ratio as projected under the
various rate change environments.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
RESULTS OF OPERATIONS
We recorded net income of $7.8 million or $1.15 per diluted share for
the first quarter of 2007. This compares to $7.3 million or $1.06 per diluted
share for the same quarter last year.
18
NET INTEREST INCOME
The following tables provide information concerning the balances,
yields and rates on interest-earning assets and interest-bearing liabilities
during the periods indicated.
THREE MONTHS ENDED MARCH 31,
---------------------------------------------------------------------------
2007 2006
---------------------------------- ---------------------------------
AVERAGE INTEREST & YIELD/ AVERAGE INTEREST & YIELD/
BALANCE DIVIDENDS RATE (1) BALANCE DIVIDENDS RATE (1)
------- --------- -------- ------- --------- --------
ASSETS: (Dollars in Thousands)
Interest-earning assets:
Loans (2) (3):
Commercial real estate loans ..... $ 655,669 $13,692 8.35% $ 605,189 $11,760 7.77%
Residential real estate loans 471,613 6,723 5.70 466,329 6,279 5.39
Commercial loans ............ 651,510 13,063 8.19 525,339 9,645 7.55
Consumer loans .............. 266,368 4,978 7.58 250,856 4,406 7.12
---------- ------- ---------- -------
Total loans ............... 2,045,160 38,456 7.58 1,847,713 32,090 7.01
Mortgage-backed securities (4) ... 509,224 6,237 4.90 623,551 7,332 4.70
Loans held-for-sale (3) .......... 1,090 13 4.77 594 6 4.04
Investment securities (4) (5) .... 32,757 1,714 20.93 58,060 635 4.37
Other interest-earning assets .... 37,851 668 7.16 48,690 414 3.45
---------- ------- ---------- -------
Total interest-earning assets 2,626,082 47,088 7.21 2,578,608 40,477 6.32
Allowance for loan losses ........ (27,708) ------- (25,515) -------
Cash and due from banks........... 67,087 51,364
Cash in non-owned ATMs............ 142,103 144,436
Bank owned life insurance......... 55,473 54,365
Other noninterest-earning assets.. 65,758 59,986
---------- ----------
Total assets................. $2,928,795 $2,863,244
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand...... $ 135,464 270 0.81% $ 123,805 $ 140 0.46%
Money market................. 315,525 3,088 3.97 226,229 1,714 3.07
Savings...................... 219,912 446 0.82 247,152 511 0.84
Retail time deposits 456,523 5,216 4.63 322,184 2,688 3.38
---------- ------- ---------- -------
Total interest-bearing
customer deposits........ 1,127,424 9,020 3.24 919,370 5,053 2.23
Jumbo certificates of deposits ... 102,856 1,355 5.34 60,081 663 4.48
Brokered certificates of deposit.. 298,247 4,013 5.46 226,022 2,461 4.42
---------- ------- ---------- -------
Total interest-bearing
deposits................. 1,528,527 14,388 3.82 1,205,473 8,177 2.75
FHLB of Pittsburgh advances....... 697,253 8,922 5.12 1,003,350 10,743 4.28
Trust preferred borrowings........ 67,011 1,177 7.03 67,011 1,017 6.07
Other borrowed funds.............. 131,232 1,541 4.70 121,822 1,237 4.06
---------- ------- -------
Total interest-bearing
liabilities................ 2,424,023 26,028 4.30 2,397,656 21,174 3.53
Noninterest-bearing demand ------- -------
deposits........................ 267,354 257,963
Other noninterest-bearing
liabilities..................... 26,399 21,022
Minority interest ................ 49 154
Stockholders' equity.............. 210,970 186,449
---------- ----------
Total liabilities and
stockholders' equity............ $2,928,795 $2,863,244
========== ==========
Excess of interest-earning assets
over interest-bearing
liabilities..................... $ 202,059 $ 180,952
=========== ===========
Net interest and dividend income.. $21,060 $19,303
======= =======
Interest rate spread.............. 2.91% 2.79%
==== ====
Net interest margin............... 3.25% 3.04%
==== ====
(1) Weighted average yields have been computed on a tax-equivalent basis.
(2) Nonperforming loans are included in average balance computations.
(3) Balances are reflected net of unearned income.
(4) Includes securities available-for-sale.
(5) Includes reverse mortgages.
19
Net interest income for the first quarter of 2007 was $21.1 million
compared to $19.3 million for the same quarter in 2006. Mainly contributing to
the increase in net interest income was an improved balance sheet mix of earning
assets and interest-bearing liabilities. Loans, with a yield of 7.58%, increased
$197.4 million while mortgage-backed securities, with a yield of 4.90%, declined
$114.3 million mostly due to scheduled repayments. In addition, deposits, with a
rate of 3.82%, increased $323.1 million while FHLB advances, with a rate of
5.12%, decreased $306.1 million. The yield on earning assets increased 0.89% in
comparison to the first quarter of 2006 while the rate on interest-bearing
liabilities increased by 0.77%. The net interest margin for the first quarter of
2007 was 3.25%, up 0.21% from the first quarter 2006.
ALLOWANCE FOR LOAN LOSSES
We maintain allowances for credit losses and charge losses to these
allowances when such losses are realized. The determination of the allowance for
loan losses requires significant judgment reflecting management's best estimate
of probable loan losses related to specifically identified loans as well as
probable loan losses in the remaining loan portfolio. Management's evaluation is
based upon a continuing review of these portfolios.
Management establishes the loan loss allowance in accordance with
guidance provided in the Securities and Exchange Commission's Staff Accounting
Bulletin 102 ("SAB 102"). Its methodology for assessing the appropriateness of
the allowance consists of several key elements which include: specific
allowances for identified problem loans; formula allowances for commercial and
commercial real estate loans; and allowances for pooled homogenous loans.
Specific reserves are established for certain loans in cases where
management has identified significant conditions or circumstances related to a
specific credit that indicate the probability that a loss has been incurred.
The allowance formula for commercial and commercial real estate loans
are calculated in each case by applying loss factors to outstanding loans based
on the internal risk grade of loans derived from analysis of both the
probability of default and the probability of loss should default occur. As a
result, changes in risk grades of both performing and nonperforming loans affect
the amount of the formula allowance. Loss factors by risk grade have a basis in
our historical default experience for such loans and an assessment of the
probability of default. Loss adjustment factors are applied based on criteria
discussed below.
Pooled loans are loans that are usually smaller,
not-individually-graded and homogenous in nature, such as consumer installment
loans and residential mortgages. Loan loss allowances for pooled loans are based
on a ten-year net charge-off history. The average loss allowance per homogenous
pool is based on the product of average annual historical loss rate and the
average estimated duration of the pool multiplied by the pool balances. These
separate risk pools are then assigned a reserve for losses based upon this
historical loss information and historical loss adjustment factors.
Historical loss adjustment factors are based upon management's
evaluation of various current conditions, including those listed below.
o General economic and business conditions affecting the Bank's key lending
areas,
o Credit quality trends,
o Recent loss experience in particular segments of the portfolio,
o Collateral values and loan-to-value ratios,
o Loan volumes and concentrations, including changes in mix,
o Seasoning of the loan portfolio,
o Specific industry conditions within portfolio segments,
o Bank regulatory examination results, and
o Other factors, including changes in quality of the loan origination,
servicing and risk management processes.
Our loan officers and risk managers meet at least quarterly to discuss
and review these conditions and risks associated with individual problem loans.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review our allowance for such losses. We also
give consideration to the results of these regulatory agency examinations. The
provision for loan losses decreased to $371,000 for the first quarter of 2007
from $688,000 during the first quarter of 2006, primarily the result of a change
in estimates used in the calculation beginning in the third quarter of 2006 and
slower loan growth during the quarter. The change in estimates is the result of
continued analysis of our loss experience on commercial loans and the our
consideration of proposed regulatory guidance and professional studies on the
classification of commercial credits to change its estimates. This change
combines an estimate of the probability of default for each of our classified
loan grades with an estimate of loss should an event of default occur. The
estimate of loss further segments classified loan grades into sub-grades with
unique factors. We believe this analysis better estimates losses currently in
its loan portfolio.
20
We maintain allowances for credit losses and charge losses to these
allowances when such losses are realized. The allowances for losses are
maintained at a level which management considers adequate to provide for losses
based upon an evaluation of known and inherent risks in the portfolios.
Management's evaluation is based upon a continuing review of the portfolios.
The table below represents a summary of the changes in the allowance
for loan losses during the periods indicated.
THREE MONTHS ENDED MARCH 31,
----------------------------
2007 2006
-------- --------
(Dollars in Thousands)
Beginning balance ....................... $ 27,384 $ 25,381
Provision for loan losses ............... 371 688
Charge-offs:
Residential real estate ............ - 58
Commercial real estate (1) ......... - -
Commercial ......................... - 30
Overdrafts ......................... 353 -
Consumer ........................... 107 81
-------- --------
Total charge-offs ............... 460 169
-------- --------
Recoveries:
Residential real estate ............ 1 3
Commercial real estate (1) ......... 118 147
Commercial ......................... 74 49
Overdrafts ......................... 119 -
Consumer ........................... 22 44
-------- --------
Total recoveries ................ 334 243
-------- --------
Net charge-offs (recoveries) ............ 126 (74)
-------- --------
Ending balance .......................... $ 27,629 $ 26,143
======== ========
Net charge-offs to average gross loans
outstanding, net of unearned income (2) 0.02% (0.02)%
======== ========
(1) Includes commercial mortgage and construction loans.
(2) Ratios for the three months ended March 31, 2007 and 2006 are annualized.
NONINTEREST INCOME
Noninterest income for the quarter ended March 31, 2007 was $10.7
million compared to $9.0 million for the first quarter of 2006, an increase of
$1.7 million or 19%. Although almost all noninterest income categories showed
improvements, the majority of the increase over the first quarter of 2006 was
attributable to a $1.0 million increase in deposit service charges. This
increase was due to an increase in deposit accounts and additional services
offered. Credit/debit card and ATM income increased $323,000 as a result of
higher rates earned on cash in non-owned ATM's. Fee revenues for the first
quarter of 2007 represented 33% of total revenues compared to 32% during the
first quarter of 2006.
NONINTEREST EXPENSE
Noninterest expense for the quarter ended March 31, 2007 was $19.4
million for an increase of $3.1 million over the $16.2 million reported for the
same period in 2006. The 19% increase over the first quarter of 2006 was mainly
related to our expansion including the opening of three branch offices, three
branch renovations/relocations, the continued growth of the Wealth Management
Division and the formation of a reverse mortgage business unit. Additionally, we
moved into our new corporate headquarters in the WSFS Bank Center building in
March 2007. This investment in growth is reflected in higher compensation,
occupancy and equipment expenses. The number of full-time equivalent Associates
increased from 529 at in the first quarter of 2006 to 564 at in the first
quarter of 2007. The first quarter of 2006 also included a $322,000 reduction in
a reserve included in professional fees related to reverse mortgages.
INCOME TAXES
The Company and its subsidiaries, with the exception of WSFS Reit,
Inc., file a consolidated Federal income tax return and separate state income
tax returns. WSFS Reit, Inc. files separate Federal and state income tax
returns. Income taxes are accounted for
21
in accordance with SFAS 109, which requires the recording of deferred income
taxes for tax consequences of "temporary differences." We recorded a provision
for income taxes of $4.3 million during the three months ended March 31, 2007
compared to an income tax provision of $4.1 million for the same period in 2006.
The effective tax rate for both of the three month periods ended March 31, 2007
and 2006 were 36%.
The effective tax rate reflects the recognition of certain tax benefits
in the financial statements including those benefits from tax-exempt interest
income, Bank-Owned Life Insurance ("BOLI") income and fifty-percent interest
income exclusion on a loan to an Employee Stock Ownership Plan. These tax
benefits are offset by the tax effect of stock-based compensation expense
related to incentive stock options and a provision for state income tax expense.
We frequently analyze our projections of taxable income and make
adjustments to our provision for income taxes accordingly.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2006, the FASB issued SFAS No. 155, Accounting for Certain
Hybrid Financial Instruments - An Amendment of Statements No. 133 and 140 ("SFAS
155"). This Statement permits fair value remeasurement for any hybrid financial
instrument that contains an embedded derivative that otherwise would require
bifurcation. It also clarifies which interest-only strips are not subject to the
requirements of SFAS 133. In addition, it establishes a requirement to evaluate
interests in securitized financial assets to identify interests that are
freestanding derivatives or that are hybrid financial instruments that contain
an embedded derivative requiring bifurcation. SFAS 155 becomes effective in
fiscal years beginning after September 15, 2006. The adoption of this Statement
did not have a material impact on the our Consolidated Financial Statements.
In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing
of Financial Assets - An Amendment of Statement No. 140 ("SFAS 156"). This
Statement will modify the accounting for servicing assets and liabilities, such
as those common with mortgage securitization activities. The new Standard
addresses the recognition and measurement of separately recognized servicing
assets and liabilities and provides an approach to lessen the efforts to obtain
hedge-like (offset) accounting. SFAS 156 becomes effective in fiscal years
beginning after September 15, 2006. The adoption of this Statement did not have
a material impact on our Consolidated Financial Statements.
In September 2006, the Emerging Issues Task Force ("EITF") reached a
final consensus on Issue 06-04, Accounting for Deferred Compensation and
Postretirement Benefit Aspects of Endorsement Split Dollar Life Insurance
Arrangements. In accordance with the EITF consensus, an agreement by an employer
to share a portion of the proceeds of a life insurance policy with an employee
during the postretirement period is a postretirement benefit arrangement
required to be accounted for in accordance with SFAS No. 106 Employers'
Accounting for Postretirement Benefits Other Than Pensions ("SFAS 106") or
Accounting Principles Board Opinion ("APB") No. 12, Omnibus Opinion -- 1967.
Furthermore, the purchase of a split dollar life insurance policy does not
constitute a settlement under SFAS 106 and, therefore, a liability for the
postretirement obligation must be recognized under SFAS 106 if the benefit is
offered under an arrangement that constitutes a plan or under Accounting
Principles Board No. 12 if it is not part of a plan. The provisions of EITF
Issue 06-04 are to be applied through either a cumulative-effect adjustment to
retained earnings as of the beginning of the year of adoption or retrospective
application. We are required to adopt this statement in the fiscal year
beginning after December 15, 2007, with early adoption permitted. We plan to
adopt this statement on January 1, 2008 and are currently assessing the impact
that the adoption will have on our Consolidated Financial Statements.
In September 2006, the FASB ratified the consensus reached by the EITF
in Issue No. 06-5, Accounting for Purchases of Life Insurance - Determining the
Amount That Could Be Realized in Accordance with FASB Technical Bulletin No.
85-4, Accounting for Purchases of Life Insurance," ("EITF 06-5"). EITF 06-5
concluded that companies purchasing a life insurance policy should record the
amount that could be realized, considering any additional amounts beyond cash
surrender value included in the contractual terms of the policy. The amount that
could be realized should be based on assumed surrender at the individual policy
or certificate level, unless all policies or certificates are required to be
surrendered as a group. When it is probable that contractual restrictions would
limit the amount that could be realized, such contractual limitations should be
considered and any amounts recoverable at the insurance company's discretion
should be excluded from the amount that could be realized. Companies are
permitted to recognize the effects of applying the consensus through either (1)
a change in accounting principle through a cumulative-effect adjustment to
retained earnings or to other components of equity or net assets as of the
beginning of the year of adoption or (2) a change in accounting principle
through retrospective application to all prior periods. EITF 06-5 was effective
for fiscal years beginning after December 15, 2006. We adopted EITF 06-5 at the
beginning of 2007, and the adoption did not have a material impact on our
Consolidated Financial Statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities-Including an amendment of FASB
Statement No. 115 ("SFAS 159"). SFAS 159 permits entities to choose to measure
eligible items at fair value at specified election dates. Unrealized gains and
losses on items for which the fair value option has been elected are to be
reported in earnings at each subsequent reporting date. The fair value option
(i) may be applied instrument by instrument, with certain
22
exceptions, (ii) is irrevocable (unless a new election date occurs) and (iii) is
applied only to entire instruments and not to portions of instruments. SFAS 159
is effective for us on January 1, 2008. We are currently evaluating the impact
the adoption of SFAS 159 will have on our consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
Incorporated herein by reference from Item 2, of this quarterly report
on Form 10-Q.
ITEM 4. CONTROLS AND PROCEDURES
-----------------------
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Based on their
evaluation of our disclosure controls and procedures (as defined
in Rules 13a-15(e) under the Securities Exchange Act of 1934 (the
"Exchange Act")), our principal executive officer and the
principal financial officer have concluded that as of the end of
the period covered by this Quarterly Report on Form 10-Q such
disclosure controls and procedures are effective to ensure that
information required to be disclosed by the us in the reports
that we file or submit under the Securities and Exchange
Commission's rules and forms and is accumulated and communicated
to our management, including the principal executive officer and
principal financial officer, as appropriate to allow timely
decisions regarding required disclosures.
(B) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. During the
quarter under report, there was no change in our internal control
over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over
financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
We are not engaged in any legal proceedings of a material nature at
March 31, 2007. From time to time, we are party to legal proceedings
in the ordinary course of business which enforces its security
interest in loans.
ITEM 1A. RISK FACTORS
------------
Our management does not believe there have been any material changes
to the risk factors previously disclosed under Item 1A. of the
Company's Form 10-K for the year ended December 31, 2006, previously
filed with the Securities and Exchange Commission.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
-----------------------------------------------------------
The following table lists purchases of our Common Stock during the
first quarter of 2007.
Total Number of Maximum Number
Total Number Average Shares Purchased of Shares that May
of Shares Price Paid as Part of Publicly Yet Be Purchased
Purchased per Share Announced Plans Under the Plans
-------------- ---------- ----------------- ----------------------
January 1, to January 31, 2007 0 $0.00 0 546,600
February 1, to February 28, 2007 155,000 $68.17 155,000 391,600
March 1, to March 31, 2007 226,500 $66.65 226,500 165,100
Total for the quarter ended March 31, 2007 381,500 $67.27
There is no expiration date under either Plan.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Not applicable
ITEM 5. OTHER INFORMATION
-----------------
Not applicable
ITEM 6. EXHIBITS
--------
(a) Exhibit 31 - Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
(b) Exhibit 32 - Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
23
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 9, 2007 /s/MARK A. TURNER
-------------------------------------
Mark A. Turner
President and Chief Executive Officer
Date: May 9, 2007 /s/STEPHEN A. FOWLE
-------------------------------------
Stephen A. Fowle
Executive Vice President and
Chief Financial Officer
24