WSFS Financial Corporation, the parent company of Wilmington Savings Fund Society, FSB (WSFS) today announced that it expects to take a charge in the Second Quarter of approximately $3.4 million, pretax, or $0.24 per share, after tax, for expected future residual losses on its $216 million prime automobile lease portfolio.
As discussed in previous releases, continued weakness in the used car market is adversely affecting values received upon sale of automobiles when they are returned from lease. Furthermore, larger economic losses affect the propensity of the lessee to return the vehicle to the lessor (WSFS) upon lease termination. These two factors combined, larger losses and higher return rates, necessitated a thorough review of lease residual values for permanent impairment. This review included an evaluation of expected losses using internal and third party data, expected customer behavior and WSFS’ portfolio characteristics, and resulted in this $3.4 million provision for permanent impairment of cars currently on lease.
Partially offsetting this charge, WSFS expects to record gains, totaling approximately $1 million, or $0.07 per share, after tax, from a partial recovery on a previously reserved note receivable and, separately, gains on stock received in the demutualization of two insurance companies, in which WSFS was a shareholder.
Excluding these items above, WSFS expects to report second quarter earnings per share of between $0.38 and $0.40 per share. Included in these results are the following:
Start-up losses for WSFS’ two initiatives launched in the 4th quarter of 1999 – Wilmington National Finance, Inc., WSFS’ subprime mortgage dealer; and C1FN/everbank.com, WSFS’ initiative into branchless, online-only financial services – are expected to be near the top-end of the previously announced range of $0.07 to $0.09 per share.
In the balance of the bank, continued strong reverse mortgage portfolio performance, driven by robust real estate markets, especially in California, is expected to offset higher funding costs and operating expenses. The higher operating expenses are driven in part by the successful opening of two full-service branches and loan centers. In April, WSFS opened a branch of United Asian Bank, serving the consumer and small business needs of the Asian community in the Elkins Park neighborhood of Southeastern Pennsylvania. Also in June, WSFS opened a full-service, free-standing branch in the vibrant Hockessin community in Northern Delaware.
WSFS Financial Corporation is a $1.7 billion financial services Company. Its principal subsidiary, Wilmington Savings Fund Society, FSB, operates twenty-six retail banking offices in New Castle County and Dover, Delaware, as well as Chester, Delaware and Montgomery Counties in Pennsylvania. Other operating subsidiaries include WSFS Credit Corporation; Wilmington National Finance, Inc.; CustomerOne Financial Network, Inc.; and 838 Investment Group, Inc. For more information, please visit WSFS’ website at www.wsfsbank.com.
This release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act, that involve risk and uncertainty. It should be noted that a variety of factors could cause actual results to differ materially from the anticipated results or other expectations expressed in the Company’s forward-looking statements. The risks and uncertainties include, but are not limited to, the growth of the economy, interest rate movements, timely development of technology enhancements for its products and operating systems, the impact of competitive products, services and pricing, customer-based requirements, Congressional legislation, regulations, estimates, and similar matters. Readers of this release are cautioned not to place undue reliance on forward-looking statements which are subject to influence by the named risk factors and unanticipated future events. Actual results, accordingly, may differ materially from management expectations. WSFS Financial Corporation does not undertake, and specifically disclaims any obligation to publicly release the results 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.