WSFS Closing Reverse Mortgage Subsidiary After Earnings Announcement

WSFS Financial Corporation, the parent company of WSFS Bank, reported a quarterly loss per common share of $0.50 and net loss of $2.3 million compared to diluted earnings per common share of $1.07 and net income of $6.7 million for the second quarter of 2008.

Included in its earnings announcement is that it’s conducting an early wind down of 1st Reverse Financial Services, the company’s reverse mortgage subsidiary.

In late April 2008, WSFS acquired a majority stake in 1st Reverse Financial Services, LLC.  During the second quarter of 2009, 1st Reverse reported a pre-tax loss of $152,000, compared to a pre-tax loss of $586,000 for the first quarter of 2009.  1st Reverse recorded $654,000 in fee income during the second quarter, an increase of $98,000, over the first quarter of 2009. Expenses were $806,000 during the second quarter, $336,000 below the first quarter of 2009.

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"Despite the improved results, the subsidiary has still not reached breakeven levels, and in the current economic climate, prospects for achieving required returns are weak,” said Mark A. Turner, President and CEO of WSFS. “As a result, WSFS has made the decision to conduct an orderly wind-down of this start-up initiative."

As a result of this decision, during the quarter WSFS recorded an additional $1.6 million pre-tax charge related to the wind-down of 1st Reverse including the write-off of all related goodwill and intangibles, outstanding intercompany receivables and its remaining investment in this subsidiary.

Mr. Turner continued, "WSFS remains committed to the reverse mortgage product and will continue to originate reverse mortgages through its Delaware-based retail franchise. This group has been the top reverse mortgage originator in Delaware for the past year and a half."

Another interesting note from the announcement, WSFS had $953,000 in expenses related to due diligence on an acquisition prospect.  Sources close to WSFS told RMD that the company was in discussions to acquire the Senior Lending Network but the deal fell through towards the end.

WSFS Reports 2nd Quarter ’09 Results