SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-16668
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WSFS FINANCIAL CORPORATION
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Delaware 22-2866913
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
838 Market Street, Wilmington, Delaware 19899
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (302) 792-6000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01
(Title of Class)
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 twelve 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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2). YES (X) NO ( )
--- ---
The aggregate market value of the voting stock held by nonaffiliates of
the registrant, based on the closing price of the registrant's common stock as
quoted on the Nasdaq National Market(sm) as of March 14, 2003 was $169,324,015.
For purposes of this calculation only, affiliates are deemed to be directors,
executive officers and beneficial owners of greater than 5% of the outstanding
shares.
As of March 14, 2003, there were issued and outstanding 8,142,832
shares of the registrant's common stock.
-------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on April 25, 2003 are incorporated by reference in Part
III hereof. Portions of the 2002 Annual Report to shareholders are incorporated
by reference in Part II.
WSFS FINANCIAL CORPORATION
TABLE OF CONTENTS
Part I
Page
----
Item 1. Business .................................................................... 3
Item 2. Properties .................................................................. 21
Item 3. Legal Proceedings............................................................. 21
Item 4. Submission of Matters to a Vote of Security Holders........................... 21
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........ 22
Item 6. Selected Financial Data....................................................... 22
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................... 23
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.................... 23
Item 8. Financial Statements and Supplementary Data................................... 23
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...................................................... 23
Part III
Item 10. Directors and Executive Officers of the Registrant............................ 23
Item 11. Executive Compensation........................................................ 23
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Shareholder Matters........................................... 24
Item 13. Certain Relationships and Related Transactions................................ 25
Item 14. Controls and Procedures....................................................... 25
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K............... 25
Signatures.................................................................... 28
Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002...... 30
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PART I
FORWARD-LOOKING STATEMENTS
Within this Annual Report on Form 10-K and Exhibits thereto, management
has included certain "forward-looking statements" concerning the future
operations of WSFS Financial Corporation (the "Company" or "Corporation"). 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 Corporation of the protections of such safe
harbor with respect to all "forward-looking statements" contained in our
financial statements. Management has used "forward-looking statements" to
describe the future plans and strategies including expectations of the
Corporation's 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, mid-Atlantic region and the country as a whole,
loan delinquency rates, operating risk, and uncertainty of estimates in general,
and changes in federal and state regulation, 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. WSFS Financial Corporation does not
undertake and specifically disclaims 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.
ITEM 1. BUSINESS
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GENERAL
WSFS Financial Corporation (the "Company" or "Corporation") is a thrift
holding company headquartered in Wilmington, Delaware. Substantially all of the
Corporation's assets are held by its subsidiary, Wilmington Savings Fund
Society, FSB (Bank or WSFS). Founded in 1832, WSFS is one of the oldest
financial institutions in the country. As a federal savings bank, which was
formerly chartered as a state mutual savings bank, WSFS enjoys broader
investment powers than most other financial institutions. WSFS has served the
residents of the Delaware Valley for 171 years. WSFS is the largest thrift
institution headquartered in Delaware and among the three or four largest
financial institutions in the state on the basis of total deposits traditionally
garnered in-market. The Corporation's primary market area is the Mid-Atlantic
region of the United States which is characterized by a diversified
manufacturing and service economy. The long-term strategy of the Corporation is
to improve its status as a high-performing financial services company by
focusing on its core community banking business.
WSFS provides residential and commercial real estate, commercial and
consumer lending services, as well as retail deposit and cash management
services. Lending activities are funded primarily with retail deposits and
borrowings. Deposits are insured to their legal maximum by the Federal Deposit
Insurance Corporation (FDIC). WSFS conducted operations from its main office,
two operations centers and 21 retail banking offices, located in northern
Delaware and southeastern Pennsylvania. In 2002, for strategic reasons, WSFS
transferred 6 branch offices that were outside of its core footprint to other
financial institutions. The Company's website is "www.wsfsbank.com". The Company
makes available on its website, as soon as reasonably practicable after it
electronically files with or furnishes such material to the Securities and
Exchange Commission, its Annual Report on Form 10-K, Quarterly Reports on Form
10-Q, Current Reports on Form 8-K and amendments to those reports pursuant to
section 13(a) of the Exchange Act.
The Corporation has two consolidated subsidiaries, WSFS and WSFS
Capital Trust I. The Corporation has no unconsolidated subsidiaries or
off-balance sheet entities. Fully-owned and consolidated subsidiaries of WSFS
include WSFS Credit Corporation (WCC), which is engaged primarily in indirect
motor vehicle leasing; WSFS Investment Group, Inc. (formerly 838 Investment
Group, Inc.), which markets various third-party insurance products and
securities through
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WSFS' branch system; and WSFS Reit, Inc., which holds qualifying real estate
assets and may be used in the future to raise capital. An additional subsidiary,
Star States Development Company (SSDC), was dissolved in 2002.
In 2000, the Board of Directors of the Corporation approved plans to
discontinue the operations of WCC. WCC, which had 2,317 lease contracts and
1,052 loan contracts at December 31, 2002, no longer accepts new applications
but continues to service existing loans and leases until their maturity.
Management estimates that substantially all loan and lease contracts will mature
by the end of 2004. For a detailed discussion, see the Discontinued Operations
section of Management's Discussion and Analysis ("MD&A") incorporated herein by
reference at Part II, item 7 and Note 2 to the Financial Statements of the
Corporation's 2002 Annual Report to Shareholders.
In addition to the wholly owned subsidiaries, WSFS had consolidated two
non-wholly owned subsidiaries, CustomerOne Financial Network, Inc. (C1FN) and
Wilmington Finance, Inc. (WF). C1FN, a 21% owned subsidiary engaged in Internet
and branchless banking, was sold in November 2002. WF, a majority owned
subsidiary, engaged in sub-prime residential mortgage banking and was sold in
January 2003. Both subsidiaries are therefore classified as businesses
held-for-sale in the Financial Statements. For a further discussion, see the
Businesses Held-for-Sale section of the MD&A and Note 3 to the Financial
Statements of the Corporations 2002 Annual Report to Shareholders.
These divestitures are consistent with recent strategic actions of WSFS
to simplify its operations and better focus resources and capital on WSFS' core
bank.
Competition
WSFS is the second largest independent full service banking institution
headquartered and operating in Delaware. It primarily attracts deposits through
its system of branches, which numbered 21 at December 31, 2002. Eighteen
branches are located in northern Delaware's New Castle County, WSFS' primary
market. These branches maintain approximately 171,000 total account
relationships with approximately 54,000 total households in New Castle County,
or 28% of all households in New Castle County, Delaware. One branch is in the
state capital, Dover, located in central Delaware's Kent County. Two other
branches are located in southeastern Pennsylvania.
The competition for deposit products comes from other insured financial
institutions such as commercial banks, thrift institutions and credit unions in
the Registrant's market area. Deposit competition also includes a number of
insurance products sold by local agents and investment products such as mutual
funds and other securities sold by local and regional brokers. Loan competition
comes from other insured financial institutions such as commercial banks, thrift
institutions and credit unions.
SUBSIDIARIES
The Corporation has two subsidiaries, Wilmington Savings Fund Society,
FSB (WSFS) and WSFS Capital Trust I. WSFS Capital Trust I was formed in 1998 to
issue Trust Preferred Securities. The Trust invested all of the proceeds from
the sale of the Trust Preferred Securities in Junior Subordinated Debentures of
the Corporation. The Corporation used the proceeds from the Junior Subordinated
Debentures for general corporate purposes, including the redemption of higher
yielding debt.
At December 31, 2002, WSFS had three wholly-owned, first-tier
subsidiaries WSFS Investment Group (formerly 838 Investment Group, Inc.), WSFS
Reit, Inc and WCC. In addition to the wholly owned subsidiaries, the Corporation
consolidated a non-wholly owned subsidiary, Wilmington Finance (WF), the primary
lender to its non-bank subsidiaries. WF was sold in January 2003 and is listed
as a business held-for-sale at December 31, 2002. For a further discussion, see
the businesses held for sale section of the MD&A and Note 3 to the Financial
Statements of the Corporation's 2002 Annual Report.
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838 Investment Group, Inc. was formed in 1989. This subsidiary markets
various third-party investment and insurance products, such as single-premium
annuities, whole life policies and securities primarily through WSFS' branch
system.
WSFS Reit, Inc. is a real estate investment trust formed in 2002 to
hold qualifying real estate assets.
WCC is engaged primarily in indirect motor vehicle leasing. In 2000,
the Board of Directors of the Corporation approved plans to discontinue the
operations of WCC. WCC, which had 2,317 lease contracts and 1,052 loan contracts
at December 31, 2002, no longer accepts new applications but continues to
service existing loans and leases until their maturity. Management estimates
that substantially all loan and lease contracts will mature by the end of 2004.
For a detailed discussion, see the Discontinued Operations section of the MD&A
and Note 2 to the Financial Statements of the Corporation's 2002 Annual Report.
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
Condensed average balance sheets for each of the last three years and
analyses of net interest income and changes in net interest income due to
changes in volume and rate are presented in "Results of Operations" included in
Item 7 of MD&A are incorporated herein by reference.
INVESTMENT ACTIVITIES
The Company's short-term investment portfolio is intended to provide
collateral for borrowings and to meet liquidity requirements. Book values of
investment securities and short-term investments by category, stated in dollar
amounts and as a percent of total assets, follow:
December 31,
------------------------------------------------------------------------
2002 2001 2000
--------------------- -------------------- -------------------
Percent Percent Percent
of of of
Amount Assets Amount Assets Amount Assets
------ ------- ------ ------- ------ -------
(Dollars In Thousands)
Held-to-Maturity:
- -----------------
Corporate bonds............................. $ 310 0.0% $ 1,372 0.1% $ 3,885 0.2%
State and political subdivisions ........... 10,414 0.6 11,024 0.6 10,861 0.6
-------- --- -------- --- ------- ---
10,724 0.6 12,396 0.7 14,746 0.8
-------- --- -------- --- ------- ---
Available-for-Sale:
- -------------------
U.S. Government and agencies................ 11,053 0.7 - - 1,893 0.1
Corporate bonds............................. - - 1,798 0.1 13,101 0.8
-------- --- -------- --- ------- ---
11,053 0.7 1,798 0.1 14,994 0.9
-------- --- -------- --- ------- ---
Short-term investments:
- -----------------------
Federal funds sold and securities purchased
under agreements to resell.............. 64,045 3.8 65,779 3.4 3,500 0.2
Interest-bearing deposits in other banks (1) 7,476 0.4 28,360 1.5 7,318 0.4
-------- -------- --- -------
71,521 4.2 94,139 4.9 10,818 0.6
-------- --- -------- --- ------- ---
$ 93,298 5.5% $108,333 5.7% $40,558 2.3%
======== === ======== === ======= ===
- ----------------------
(1) Interest-bearing deposits in other banks do not include deposits with a
maturity greater than one year.
During 2002, WSFS purchased $241.1 million in U.S. Government agency
securities which were classified as available-for-sale. In addition, there were
sales of $1.8 million in corporate bonds, and $2.6 million in corporate and
municipal bond calls from which losses of $15,000 and gains of $2,000,
respectively, were realized. There were also $50 million in investment
securities on the books of C1FN when it was sold in November 2002. The remainder
of the changes in 2002 resulted from repayments and maturities. In 2001, WSFS
purchased $75 million in U.S. Treasury bills and $306,000 in corporate bonds all
of which were classified as available-for-sale. In addition, there were sales of
$644,000 in
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corporate bonds and $3 million in corporate bond calls, from which gains of
$9,000 and losses of $5,000 were realized. The remainder of the changes in 2001
resulted from repayments and maturities. In 2000, WSFS purchased $14 million in
corporate bonds and $12 million in U.S. Government securities, all of which were
classified as available-for-sale, and $9 million in municipal bonds which were
classified as held-to-maturity. There was also a $2 million corporate bond which
was reclassified from held-to-maturity to available-for-sale in 2000 with the
adoption of SFAS No. 133 (see Note 19 of the Financial Statements for further
discussion). In addition, there were sales of U.S. Government securities during
2000 totaling $25 million and a $750,000 corporate call, from which gains of
$18,000 and losses of $67,000, respectively, were realized. There was also a
sale of $10 million in U.S. Government securities in January 2000, for which no
loss was recorded in 2000 as these securities had been marked-to-market in 1999.
In addition, the Company recognized a gain of $40,000 on the sale of common
stock received from the demutualization of insurance companies of which WSFS was
a policyholder. The remainder of the changes during 2000 resulted from
repayments and maturities.
The following table sets forth the terms to maturity and related
weighted average yields of investment securities and short-term investments at
December 31, 2002. Substantially all of the related interest and dividends
represent taxable income.
At December 31, 2002
Weighted
Average
Amount Yield
------ -----
(Dollars in Thousands)
Held-to-Maturity:
-----------------
Corporate bonds:
After one but within five years......................... $ 124 6.93%
After five but within ten years......................... 62 7.32
After ten years......................................... 124 7.52
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310 7.24
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State and political subdivisions (1):
After one but within five years......................... 4,494 7.18
After five but within ten years......................... 1,495 7.39
After ten years......................................... 4,425 6.30
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10,414 6.84
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Total debt securities, held-to-maturity................... 10,724 6.85
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Available-for-Sale:
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U.S. Government and agencies:
After one but within five years......................... 11,053 2.51
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11,053 2.51
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Total debt securities, available-for-sale................. 11,053 2.51
-------
Short-term investments:
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Federal funds sold and securities purchased under
agreement to resell................................ 64,045 1.18
Interest-bearing deposits in other banks................ 7,476 0.95
-------
Total short-term investments.............................. 71,521 1.16
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$93,298 1.97%
======= ====
(1) Yields on state and political subdivisions are not calculated on a
tax-equivalent basis since the effect would be immaterial.
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In addition to the foregoing investment securities, the Company has
maintained an investment portfolio of mortgage-backed securities. Purchases of
mortgage-backed securities, including collateralized mortgage obligations,
totaled $273 million in 2002. All purchases of mortgage-backed securities are
classified as available-for-sale, except for $11 million which is being held in
a trading account. These securities are part of the settlement of the reverse
mortgage portfolio sale which is discussed further in Note 6 of the Financial
Statements. There were also sales of $128 million in mortgage-backed securities,
which resulted in a gain of $36,000. Finally, there were $71 million in
mortgage-backed securities on the books of C1FN when they were sold in November
2002. In 2001, purchases of mortgage-backed securities totaled $281 million, all
classified as available-for-sale. There were also sales of $4 million of
mortgage-backed securities, which resulted in gains of $78,000. In 2000,
purchases of mortgage-backed securities, totaled $210 million, all of which were
classified as available-for-sale. There were also sales of $195 million of
mortgage-backed securities, as part of a deleveraging strategy, which resulted
in net losses of $6.5 million. In addition there was a sale of $24 million in
mortgage-backed securities in January 2000 for which a loss of $730,000 was
recognized in 1999. Reductions in the other categories, for all years, were due
to principal repayments.
The following table sets forth the book value of mortgage-backed
securities and their related weighted average contractual rates at the end of
the last three fiscal years.
December 31,
--------------------------------------------------------------------------
2002 2001 2000
-------------------- ---------------------- ------------------------
(Dollars in Thousands)
Amount Rate Amount Rate Amount Rate
------ ------ ------ ------ ------ -----
Held-to-Maturity:
- -----------------
Collateralized mortgage obligations ........ $ 13,881 6.90% $ 31,889 6.89% $ 56,091 6.75%
FNMA........................................ 11,614 5.15 18,355 5.57 24,908 6.05
FHLMC....................................... 13,662 5.53 20,041 5.70 26,664 6.04
-------- ---- -------- ---- -------- ----
$ 39,157 5.90% $ 70,285 6.20% $107,663 6.41%
======== ==== ======== ==== ======== ====
Available-for-Sale:
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Collateralized mortgage obligations (1)..... $ 84,735 4.68% $260,784 5.51% $229,882 7.04%
FNMA........................................ 13,346 4.74 15,276 5.45 1,141 7.25
FHLMC....................................... - - 15,138 4.84 1,032 7.76
GNMA........................................ - - 241 6.89 - -
-------- ---- -------- ---- -------- ----
$ 98,081 4.69% $291,439 5.47% $232,055 7.04%
======== ==== ======== ==== ======== ====
Trading:
- --------
Collateralized mortgage obligations (2)..... $ 11,000 4.42% $ - - $ - -%
-------- ---- -------- ---- -------- ----
$ 11,000 4.42% $ - -% $ - -%
======== ==== ======== ==== ======== ====
(1) Includes $12.5 million and $21.3 million in private issues of Citicorp
Mortgage Securities and Washington Mutual, respectively, all stated at
their fair market value.
(2) Includes $11.0 million in private issues from Structured Asset Securities
Corporation stated at fair market value.
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CREDIT EXTENSION ACTIVITIES
Traditionally, the majority of a typical thrift institution's loan
portfolio has consisted of first mortgage loans on residential properties.
However, as a result of various legislative and regulatory changes since 1980,
the commercial and consumer lending powers of WSFS have increased substantially.
WSFS' current lending activity is more focused on lending to consumers and small
businesses in and around the state of Delaware.
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The following table sets forth the composition of the Corporation's
loan portfolio by type of loan at the dates indicated. Other than as disclosed
below, the Company had no concentrations of loans exceeding 10% of total loans
at December 31, 2002:
December 31,
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2002 2001 2000 1999 1998
------------------ ----------------- --------------- --------------- -----------------
Types of Loans Amount Percent Amount Perecnt Amount Percent Amount Percent Amount Percent
-------------- ------ ------- ------ ------- ------ ------- ------ ------- ------ -------
(Dollars in Thousands)
Residential real estate (1)...... $ 541,465 45.2% $ 487,845 43.7% $440,136 45.7% $393,243 45.7% $291,110 39.4%
Commercial real estate:
Commercial mortgage.............. 228,089 19.1% 208,286 18.7% 190,707 19.8% 201,559 23.4% 226,063 30.6%
Construction..................... 59,555 5.0% 48,002 4.3% 30,183 3.1% 21,561 2.5% 11,642 1.51%
---------- ----- ---------- ----- -------- ----- -------- ----- -------- -----
Total commercial real estate.. 287,644 24.1% 256,288 23.0% 220,890 22.9% 223,120 25.9% 237,705 32.1%
Commercial....................... 209,567 17.5% 197,790 17.7% 151,887 15.7% 115,931 13.5% 97,524 13.2%
Consumer......................... 181,851 15.2% 198,366 17.8% 175,268 18.2% 154,857 18.0% 141,238 19.1%
---------- ----- ---------- ----- -------- ----- -------- ----- -------- -----
Gross loans...................... 1,220,527 102.0% 1,140,289 102.2% 988,181 102.5% 887,151 103.1% 767,577 103.8%
Less:
Unearned income.................. 2,043 0.2% 3,320 0.3% 3,268 0.3% 4,355 0.5% 5,383 0.7%
Allowance for loan losses........ 21,452 1.8% 21,597 1.9% 21,423 2.2% 22,223 2.6% 22,732 3.1%
---------- ----- ---------- ----- -------- ----- -------- ----- -------- -----
Net loans........................ $1,197,032 100.0% $1,115,372 100.0% $963,490 100.0% $860,573 100.0% $739,462 100.0%
========== ===== ========== ===== ======== ===== ======== ===== ======== =====
(1) Includes $121,349, $84,691, $23,274, $24,572 and $3,103 of residential
mortgage loans held-for-sale at December 31, 2002, 2001, 2000, 1999 and
1998, respectively.
-9-
The following table sets forth information as of December 31, 2002
regarding the amount of loans maturing in the Company's portfolios, including
scheduled repayments of principal based on contractual terms to maturity. In
addition, the table sets forth the amount of loans maturing during the indicated
periods based on if the loan has a fixed or adjustable rate. Loans having no
stated maturity or repayment schedule are reported in the one year or less
category.
Less than One to Over
One Year Five Years Five Years Total
-------- ---------- ---------- -----
(In Thousands)
Real estate loans (1)... $ 57,364 $211,253 $379,588 $ 648,205
Construction loans...... 43,419 15,729 407 59,555
Commercial loans........ 48,192 79,554 81,821 209,567
Consumer loans ......... 61,488 61,299 59,064 181,851
-------- -------- -------- ----------
$210,463 $367,835 $520,880 $1,099,178
======== ======== ======== ==========
Rate sensitivity:
Fixed................. $ 53,227 $176,034 $268,676 $ 497,937
Adjustable 157,236 191,801 252,204 601,241
-------- -------- -------- ----------
Gross loans $210,463 $367,835 $520,880 $1,099,178
======== ======== ======== ==========
(1) Includes commercial mortgage loans; does not include loans held-for-sale.
The above schedule does not include any prepayment assumptions.
Prepayments tend to be highly dependent upon the interest rate environment.
Management believes that the actual repricing and maturity of the loan portfolio
is significantly shorter than is reflected in the above table as a result of
prepayments.
Residential Real Estate Lending.
WSFS originates residential mortgage loans with loan-to-value ratios up
to 97%. WSFS generally requires private mortgage insurance for up to 30% of the
mortgage amount for mortgage loans with loan-to-value ratios exceeding 80%. WSFS
does not have any significant concentrations of such insurance with any one
insurer. On a very limited basis, WSFS originates/purchases loans with
loan-to-value ratios exceeding 80% without a private mortgage insurance
requirement. At December 31, 2002, the balance of all such loans was
approximately $17.4 million. Generally, residential mortgage loans are
underwritten and documented in accordance with standard underwriting criteria
published by Federal Home Loan Mortgage Corporation (FHLMC) to assure maximum
eligibility for subsequent sale in the secondary market. However, unless loans
are specifically designated for sale, the Company holds newly originated loans
in its portfolio for long-term investment. Among other things, title insurance
is required to insure the priority of its lien, and fire and extended coverage
casualty insurance is required for the properties securing the residential
loans. All properties securing residential loans made by WSFS are appraised by
independent appraisers selected by WSFS and subject to review in accordance with
WSFS standards.
The majority of WSFS' residential real estate adjustable-rate loans
have interest rates that adjust yearly, after an initial period. Usually the
change in rate is limited to two percentage points at the adjustment date.
Adjustments are generally based upon a margin (currently 2.75%) over the weekly
average yield on U.S. Treasury securities adjusted to a constant maturity, as
published by the Federal Reserve Board.
Generally, the maximum rate on these loans is up to six percent above
the initial interest rate. WSFS underwrites adjustable-rate loans under
standards consistent with private mortgage insurance and secondary market
criteria. WSFS does not originate adjustable-rate mortgages with payment
limitations that could produce negative amortization. Consistent with industry
practice in its market area, WSFS has typically originated adjustable-rate
mortgage loans with discounted initial interest rates.
The retention of adjustable-rate mortgage loans in WSFS' loan portfolio
helps mitigate WSFS' risk to changes in interest rates. However, there are
unquantifiable credit risks resulting from potential increased costs to the
borrower as a result of repricing adjustable-rate mortgage loans. It is possible
that during periods of
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rising interest rates, the risk of default on adjustable-rate mortgage loans may
increase due to the upward adjustment of interest costs to the borrower.
Further, although adjustable-rate mortgage loans allow WSFS to increase the
sensitivity of its asset base to changes in interest rates, the extent of this
interest sensitivity is limited by the periodic and lifetime interest rate
adjustment limitations. Accordingly, there can be no assurance that yields on
WSFS' adjustable-rate mortgages will adjust sufficiently to compensate for
increases in WSFS' cost of funds during periods of extreme interest rate
increases.
The original contractual loan payment period for residential loans is
normally 10 to 30 years. Because borrowers may refinance or prepay their loans
without penalty, such loans tend to remain outstanding for a substantially
shorter period of time. First mortgage loans customarily include "due-on-sale"
clauses on adjustable- and fixed-rate loans. This provision gives the
institution the right to declare a loan immediately due and payable in the event
the borrower sells or otherwise disposes of the real property subject to the
mortgage. Due-on-sale clauses are an important means of adjusting the rate on
existing fixed-rate mortgage loans to current market rates. WSFS enforces
due-on-sale clauses through foreclosure and other legal proceedings to the
extent available under applicable laws.
In addition to loans originated for its own portfolio, WSFS originated
nonconforming residential mortgage loans through its non wholly-owned
subsidiary, Wilmington Finance, Inc. ("WF"). These loans were resold in the
secondary market on a servicing released, limited recourse basis. They were
originated using the underwriting guidelines of the various investors to which
WF sells its loans. These loans are typically sold to investors within 15 to 45
days of origination.
The mortgage loans that WF originates are fully amortizing, fixed or
adjustable rate, first or second lien mortgage loans. They are secured by one-to
four-family residential properties with loan-to-value ratios up to 100% and
contractual terms of 10 to 30 years. With respect to each property securing a
mortgage loan, the underwriting guidelines require, among other things, title
insurance, fire and extended coverage casualty insurance, and a full appraisal
by an independent appraiser selected and reviewed by WF. The majority of
adjustable rate mortgage loans originated by WF are indexed to the six-month
London Interbank Offered Rate (LIBOR) and have rates that adjust every six
months after a initial fixed rate period of 24 to 36 months. Adjustments are
limited to two percent at any adjustment date and eight percent over the life of
the loan.
In general, loans are sold without recourse except for the repurchase
arising from standard contract provisions covering violation of representations
and warranties or, under certain investor contracts, a default by the borrower
on the first payment. The Company also has limited recourse exposure under
certain investor contracts in the event a borrower prepays a loan in total
within a specified period after sale, typically one year. The recourse is
limited to a pro rata portion of the premium paid by the investor for that loan,
less any prepayment penalty collectible from the borrower.
Commercial Real Estate, Construction and Commercial Lending.
Federal savings banks are generally permitted to invest up to 400% of
their total regulatory capital in nonresidential real estate loans and up to 20%
of its assets in commercial loans. As a federal savings bank which was formerly
chartered as a Delaware savings bank, WSFS has certain additional lending
authority.
WSFS offers commercial real estate mortgage loans on multi-family
properties and other commercial real estate. Generally, loan-to-value ratios for
these loans do not exceed 80% of appraised value at origination.
WSFS offers commercial construction loans to developers. In some cases
these loans are made as "construction/permanent" loans, which provides for
disbursement of loan funds during construction and automatic conversion to
mini-permanent loans (1-5 years) upon completion of construction. These
construction loans are made on a short-term basis, usually not exceeding two
years, with interest rates indexed to the WSFS
-11-
prime rate, in most cases, and adjusted periodically as WSFS' prime rate
changes. The loan appraisal process includes the same evaluation criteria as
required for permanent mortgage loans, but also takes into consideration
completed plans, specifications, comparables and cost estimates. Prior to
approval of the credit, these items are used as a basis to determine the
appraised value of the subject property when completed. Policy requires that all
appraisals be reviewed independently of the commercial lending area. Generally,
the loan-to-value ratios for construction loans do not exceed 75%. The initial
interest rate on the permanent portion of the financing is determined by the
prevailing market rate at the time of conversion to the permanent loan. At
December 31, 2002, $101.0 million was committed for construction loans, of which
$59.6 million had been disbursed.
WSFS' commercial lending, excluding real estate loans, includes loans
for the purpose of financing equipment acquisitions, expansion, working capital
and other business purposes. These loans generally range in amounts up to $5
million, and their terms range from less than one year to seven years. The loans
generally carry variable interest rates indexed to WSFS' prime rate, or LIBOR,
at the time of closing. WSFS intends to continue originating commercial loans to
small businesses in its market area.
Commercial, commercial mortgage and construction lending have a higher
level of risk as compared to residential mortgage lending. These loans typically
involve larger loan balances concentrated in single borrowers or groups of
related borrowers. In addition, the payment experience on loans secured by
income-producing properties is typically dependent on the successful operation
of the related real estate project and may be more subject to adverse conditions
in the commercial real estate market or in the economy generally. The majority
of WSFS' commercial and commercial real estate loans are concentrated in
Delaware and surrounding areas.
Construction loans involve additional risk because loan funds are
advanced as the construction progresses. The valuation of the underlying
collateral can be difficult to quantify prior to the completion of the
construction. This is due to uncertainties inherent in construction such as
changing construction costs, delays arising from labor or material shortages and
other unpredictable contingencies. WSFS attempts to mitigate these risks and
plan for these contingencies through additional analysis and monitoring of its
construction projects.
Federal law limits the extensions of credit to any one borrower to 15%
of unimpaired capital, or 25% if the difference is secured by readily marketable
collateral having a market value that can be determined by reliable and
continually available pricing. Extensions of credit include outstanding loans as
well as contractual commitments to advance funds, such as standby letters of
credit, but do not include unfunded loan commitments. WSFS had a $35.3 million
loan to refinance an employee stock ownership plan ("ESOP") loan of a company.
Approximately 80% of the loan is secured by discounted U.S. treasury securities.
The portion of the loan that is secured by U.S. treasury securities is exempt
from the above lending limits. At December 31, 2002, no borrower had collective
outstandings exceeding the above limits.
Consumer Lending.
The primary consumer credit products of the Company are equity-secured
installment loans and home equity lines of credit. At December 31, 2002, WSFS
had equity secured installment loans totaling $123.7 million, which represented
68% of total consumer loans. A home equity line of credit grants borrowers a
line of credit of up to 100% of the appraised value (net of any senior
mortgages) of the residence. This line of credit is secured by a mortgage on the
borrower's property and can be drawn upon at any time during the period of
agreement. At December 31, 2002, WSFS had extended $89.4 million in home equity
lines of credit, of which $31.5 million had been drawn at the date. Home equity
lines of credit potentially offer federal income tax advantages, the convenience
of checkbook access and revolving credit features. Although home equity lines of
credit expose the Company to the risk that falling collateral values may leave
it inadequately secured, the Company has not had any significant adverse
experience to date.
-12-
The table below sets forth consumer loans by type, in amounts and percentages at
the dates indicated.
December 31,
----------------------------------------------------------------------------------------------
2002 2001 2000 1999 1998
------------------ ---------------- ---------------- ---------------- --------------
(Dollars in Thousands)
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
Equity secured installment loans $123,655 68.1% $125,597 63.3% $113,686 64.8% $ 97,491 63.0% $ 87,503 61.9%
Home equity lines of credit.... 31,512 17.3% 24,161 12.2% 24,408 13.9% 26,446 17.1% 27,799 19.7%
Automobile..................... 11,728 6.4% 11,737 5.9% 9,762 5.6% 9,800 6.3% 8,307 5.9%
Unsecured lines of credit...... 12,402 6.8% 20,156 10.2% 16,739 9.6% 11,370 7.3% 10,444 7.4%
Other.......................... 2,554 1.4% 16,715 8.4% 10,673 6.1% 9,750 6.3% 7,185 5.1%
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total consumer loans .......... $181,851 100.0% $198,366 100.0% $175,268 100.0% $154,857 100.0% $141,238 100.0%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
-13-
Loan Originations, Purchase and Sales.
WSFS has traditionally engaged in lending activities primarily in
Delaware and contiguous areas of neighboring states. As a federal savings bank,
however, WSFS may originate, purchase and sell loans throughout the United
States. WSFS has purchased limited amounts of loans from outside its normal
lending area when such purchases are deemed appropriate and consistent with
WSFS' overall practices. WSFS originates fixed-rate and adjustable-rate
residential real estate loans through its banking offices. In addition, WSFS has
established relationships with correspondent banks and mortgage brokers to
originate loans.
During 2002, the Company originated $2.0 billion of residential real
estate loans, of which $1.8 billion were from WF. This compares to originations
of $693 million in 2001 of which WF represented $582 million. From time to time,
WSFS has purchased whole loans and loan participations in accordance with its
ongoing asset and liability management objectives. Purchases of residential real
estate loans from correspondents and brokers primarily in the mid-Atlantic
region totaled $62 million for the year ended December 31, 2002, $25 million for
2001 and $37 million for 2000. WSFS also periodically purchased residential
mortgages from WF with the intention of holding such loans in its portfolio.
These purchases totaled $19.1 million in 2002 and $25.0 million in 2001.
Residential real estate loan sales totaled $1.8 billion in 2002, $566 million in
2001 and $145 million in 2000. While WSFS generally intends to hold loans for
the foreseeable future, WSFS sells certain newly originated fixed-rate mortgage
loans in the secondary market to control the interest rate sensitivity of its
balance sheet. The Corporation holds for investment certain of its fixed-rate
mortgage loans, with terms under 30 years, consistent with current
asset/liability management strategies.
At December 31, 2002, WSFS serviced approximately $234 million of
residential loans for others compared to $262 million at December 31, 2001. The
Company also services residential loans for its portfolio totaling $357 million
and $350 million at December 31, 2002 and 2001, respectively.
WSFS originates commercial real estate and commercial loans through its
commercial lending division. Commercial loans are made for the purpose of
financing equipment acquisitions, business expansion, working capital and other
business purposes. During 2002, WSFS originated $198 million of commercial and
commercial real estate loans compared with $262 million in 2001. These amounts
represent gross contract amounts and do not reflect amounts outstanding on such
loans.
WSFS' consumer lending is conducted primarily through its branch
offices. WSFS originates a variety of consumer credit products including home
improvement loans, home equity lines of credit, automobile loans, credit cards,
unsecured lines of credit and other secured and unsecured personal installment
loans. During 2002, consumer loan originations amounted to $86 million compared
to $128 million in 2001.
All loans to one borrower exceeding $1 million must be approved by a
management loan committee. Minutes of the management loan committee meetings and
individual loans exceeding $3 million approved by the management loan committee
are subsequently reviewed by the Executive Committee and Board of Directors of
WSFS. Separate executive committee approval is needed for loans to any borrower
who has direct or indirect outstanding commitments in excess of $5 million or
for any advances or extensions on loans previously classified by banking
regulators or WSFS' Risk Management Department. Individual Officers of WSFS have
the authority to approve smaller loan amounts, depending upon their experience
and management position.
Fee Income from Lending Activities.
WSFS earns interest and fee income from lending activities, including
fees for originating loans, for servicing loans and for loan participations
sold. The bank also receives fee income for making commitments to originate
construction, residential and commercial real estate loans. Additionally, the
bank collects fees related to existing loans which include prepayment charges,
late charges and assumption fees.
-14-
WSFS charges fees for making loan commitments. Also as part of the loan
application process, the borrower may pay WSFS for out-of-pocket costs to review
the application, whether or not the loan is closed.
Most loan fees are considered adjustments of yield in accordance with
accounting principles generally accepted in the United States of America and are
reflected in interest income. Those fees represented an immaterial amount of
interest income during the three years ended December 31, 2002. Loan fees other
than those considered adjustments of yield are reported as loan fee income, a
component of noninterest income.
All fee income on loans originated by WNF for sale to third-party
investors, including origination fees, points collected from borrowers and sales
premiums paid by investors, are recognized when loans are sold. Provisions are
made for recourse obligations.
LOAN LOSS EXPERIENCE, PROBLEM ASSETS AND DELINQUENCIES
The Company's results of operations can be negatively impacted by
nonperforming assets, which 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 collateral is
insufficient to cover principal and 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 ultimate
collectibility of principal and interest.
The Company endeavors to manage its portfolios to identify problem
loans as promptly as possible and take actions immediately which will minimize
losses. To accomplish this, WSFS' Risk Management Department monitors the asset
quality of the Company's loan and investment in real estate portfolios and
reports such information to the Credit Policy Committee, the Audit Committee of
the Board of Directors and the Controller's Department.
SOURCES OF FUNDS
WSFS funds its operations through retail and wholesale deposit growth
as well as through various borrowing sources, including repurchase agreements,
federal funds purchased and advances from the Federal Home Loan Bank (FHLB) of
Pittsburgh. Loan repayments and investment maturities also provide sources of
funds. Loan repayments and investment maturities provide a relatively stable
source of funds while certain deposit flows tend to be more susceptible to
market conditions. Borrowings are used to fund wholesale asset growth,
short-term funding of lending activities when loan demand exceeds projections,
or when deposit inflows or outflows are less than or greater than expected. On a
long-term basis, borrowings may be used to match against specific loans or
support business expansion.
Deposits. WSFS offers various deposit programs to its customers,
including savings accounts, demand deposits, interest-bearing demand deposits,
money market deposit accounts and certificates of deposits. In addition, WSFS
accepts negotiable rate certificates with balances in excess of $100,000 from
individuals, businesses and municipalities in Delaware.
WSFS is the second largest independent full service banking institution
headquartered and operating in Delaware. It primarily attracts deposits through
its system of branches, which numbered 21 at December 31, 2002. Eighteen
branches are located in northern Delaware's New Castle County, WSFS' primary
market. These branches maintain approximately 171,000 total account
relationships with approximately 54,000 total households, or 28% of all
households
-15-
in New Castle County, Delaware. One branch is in the state capital, Dover,
located in central Delaware's Kent County. Two other branches are located in
southeastern Pennsylvania.
The following table sets forth the amount of certificates of deposit of
$100,000 or more by remaining maturity at the December 31, 2002:
December 31,
Maturity Period 2002
- --------------- -------------
(In Thousands)
Less than 3 months...................... $46,997
Over 3 months to 6 months............... 9,427
Over 6 months to 12 months.............. 8,751
Over 12 months.......................... 11,295
-------
$76,470
=======
Borrowings. The Company utilizes several sources of borrowings to fund
operations. As a member of the FHLB of Pittsburgh, WSFS is authorized to apply
for advances on the security of their capital stock in the FHLB and certain of
their residential mortgages and other assets (principally securities which are
obligations of or guaranteed by the United States Government and mortgage-backed
securities), provided certain standards related to creditworthiness have been
met. As a member institution, WSFS is required to hold capital stock in the FHLB
of Pittsburgh in an amount at least equal to 5% of their outstanding advances
plus 0.7% of the Bank's unused borrowing capacity.
WSFS also sells securities under agreements to repurchase with various
brokers as an additional source of funding. When entering into these
transactions, WSFS is generally required to pledge either government securities
or mortgage-backed securities as collateral for the borrowings.
In 1998, the Company issued $50.0 million in Trust Preferred securities
due December 11, 2028. See Note 11 of the Consolidated Financial Statements for
a discussion of the Trust Preferred securities.
PERSONNEL
As of December 31, 2002 the Registrant had 870 fulltime equivalent
employees. The employees are not represented by a collective bargaining unit.
Management believes its relationship with its employees is good.
REGULATION
Regulation of the Company
Recent Legislation to Curtail Corporate Irregularities. On July 30,
2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (the "Act").
The Securities and Exchange Commission (the "SEC") promulgated certain
regulations pursuant to the Act and will continue to propose additional
implementing or clarifying regulations as necessary in furtherance of the Act.
The passage of the Act and the regulations implemented by the SEC
subject to publicly-traded companies to additional and more cumbersome reporting
regulations and disclosure. These new regulations, which are intended to curtail
corporate fraud, require the chief executive officer and chief financial officer
of the Company to personally certify certain SEC filings and Financial
Statements and to certify as to the existence of disclosure controls and
-16-
procedures within the Company are designed to ensure that information required
to be disclosed by the Company in its SEC filings is processed, summarized and
reported accurately.
The Act and regulations promulgated thereunder by the SEC also impose
additional measures to be taken by the Company's officers, directors and outside
auditors and impose accelerated reporting requirements by officers and directors
of the Company in connection with certain changes in their equity holdings of
the Company. Implementation of and compliance with the Act and corresponding
regulations will likely increase the Company's expenses.
General. The Company is a registered savings and loan holding company
and is subject to Office of Thrift Supervision (OTS) regulation, examination,
supervision and reporting requirements. As a subsidiary of a holding company,
WSFS is subject to certain restrictions in its dealings with the Company and
other affiliates.
Activities Restrictions. Because the Company became a unitary savings
and loan holding company prior to May 4, 1999, there generally are no
restrictions on its activities. If the Company were to acquire another thrift
and operate it as a separate entity, it would become subject to the activities
restrictions on multiple holding companies. Among other things, no multiple
savings and loan holding company or subsidiary thereof which is not a savings
association may commence, or continue after a limited period of time after
becoming a multiple savings and loan holding company or subsidiary thereof, any
business activity other than: (i) furnishing or performing management services
for a subsidiary savings association; (ii) conducting an insurance agency or
escrow business; (iii) holding, managing, or liquidating assets owned by or
acquired from a subsidiary savings institution; (iv) holding or managing
properties used or occupied by a subsidiary savings institution; (v) acting as
trustee under deeds of trust; (vi) those activities authorized by regulation as
of March 5, 1987 to be engaged in by multiple holding companies; or (vii) unless
the Director of OTS by regulation prohibits or limits such activities for
savings and loan holding companies, those activities authorized by the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") as
permissible for bank holding companies. Those activities described in (vii)
above also must be approved by the Director of OTS prior to being engaged in by
a multiple savings and loan holding company.
Transactions with Affiliates; Tying Arrangements. Transactions between
savings associations and any affiliate are governed by Sections 23A and 23B of
the Federal Reserve Act. An affiliate of a savings association, generally, is
any company or entity which controls or is under common control with the savings
association or any subsidiary of the savings association that is a bank or
savings association. In a holding company context, the parent holding company of
a savings association (such as the Company) and any companies which are
controlled by such parent holding company are affiliates of the savings
association. Generally, Sections 23A and 23B (i) limit the extent to which the
savings institution or its subsidiaries may engage in "covered transactions"
with any one affiliate to an amount equal to 10% of such institution's capital
stock and surplus, and limit the aggregate of all such transactions with all
affiliates to an amount equal to 20% of such capital stock and surplus and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable, to the institution or subsidiary as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and similar types of transactions.
In addition to the restrictions imposed by Sections 23A and 23B, no savings
association may (i) lend or otherwise extend credit to an affiliate that engages
in any activity impermissible for bank holding companies, or (ii) purchase or
invest in any stocks, bonds, debentures, notes or similar obligations of any
affiliate, except for affiliates which are subsidiaries of the savings
association. Savings associations are also prohibited from extending credit,
offering services, or fixing or varying the consideration for any extension of
credit or service on the condition that the customer obtain some additional
service from the institution or certain of its affiliates or that the customer
not obtain services from a competitor of the institution, subject to certain
limited exceptions.
Restrictions on Acquisitions.
A savings and loan holding company must obtain the prior approval of
the Director of OTS before acquiring, (i) control of any other savings
association or savings and loan holding company or substantially all the assets
thereof, or (ii) more than 5% of the voting shares of a savings association or
holding company thereof which is not a subsidiary.
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Under certain circumstances, a savings and loan holding company is permitted to
acquire, with the approval of the Director of OTS, up to 15% of the voting
shares of an under-capitalized savings association pursuant to a "qualified
stock issuance" without that savings association being deemed controlled by the
holding company. Except with the prior approval of the Director of OTS, no
director or officer of a savings and loan holding company or person owning or
controlling by proxy or otherwise more than 25% of such company's stock, may
also acquire control of any savings association, other than a subsidiary savings
association, or of any other savings and loan holding company.
The Director of OTS may only approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls savings
associations in more than one state if: (i) the company involved controls a
savings institution which operated a home or branch office in the state of the
association to be acquired as of March 5, 1987; (ii) the acquirer is authorized
to acquire control of the savings association pursuant to the emergency
acquisition provisions of the Federal Deposit Insurance Act; or (iii) the
statutes of the state in which the association to be acquired is located
specifically permit institutions to be acquired by state-chartered associations
or savings and loan holding companies located in the state where the acquiring
entity is located (or by a holding company that controls such state-chartered
savings institutions). The laws of Delaware do not specifically authorize
out-of-state savings associations or their holding companies to acquire
Delaware-chartered savings associations.
The statutory restrictions on the formation of interstate multiple
holding companies would not prevent WSFS from entering into other states by
mergers or branching. OTS regulations permit federal associations to branch in
any state or states of the United States and its territories. Except in
supervisory cases or when interstate branching is otherwise permitted by state
law or other statutory provision, a federal association may not establish an
out-of-state branch unless the federal association qualifies as a "domestic
building and loan association" under Section 7701(a)(19) of the Internal Revenue
Code or as a "qualified thrift lender" under the Home Owners' Loan Act and the
total assets attributable to all branches of the association in the state would
qualify such branches taken as a whole for treatment as a domestic building and
loan association or qualified thrift lender. Federal associations generally may
not establish new branches unless the association meets or exceeds minimum
regulatory capital requirements. The OTS will also consider the association's
record of compliance with the Community Reinvestment Act of 1977 in connection
with any branch application.
Regulation of WSFS
General. As a federally chartered savings institution, WSFS is subject
to extensive regulation by the OTS. The lending activities and other investments
of WSFS must comply with various federal regulatory requirements. The OTS
periodically examines WSFS for compliance with regulatory requirements. The FDIC
also has the authority to conduct special examinations of WSFS as the insurer of
deposits. WSFS must file reports with OTS describing its activities and
financial condition. WSFS is also subject to certain reserve requirements
promulgated by the Federal Reserve Board. This supervision and regulation is
intended primarily for the protection of depositors. Certain of these regulatory
requirements are referred to below or appear elsewhere herein.
Regulatory Capital Requirements. Under OTS capital regulations, savings
institutions must maintain "tangible" capital equal to 1.5% of adjusted total
assets, "Tier 1" or "core" capital equal to 4% of adjusted total assets (or 3%
if the institution is rated composite 1 under the OTS examiner rating system),
and "total" capital (a combination of core and "supplementary" capital) equal to
8% of risk-weighted assets. In addition, OTS regulations impose certain
restrictions on savings associations that have a total risk-based capital ratio
that is less than 8.0%, a ratio of Tier 1 capital to risk-weighted assets of
less than 4.0% or a ratio of Tier 1 capital to adjusted total assets of less
than 4.0% (or 3.0% if the institution is rated Composite 1 under the OTS
examination rating system). For purposes of these regulations, Tier 1 capital
has the same definition as core capital.
The OTS capital rule defines Tier 1 or core capital as common
stockholders' equity (including retained earnings), noncumulative perpetual
preferred stock and related surplus, minority interests in the equity accounts
of fully
-18-
consolidated subsidiaries, certain nonwithdrawable accounts and pledged deposits
of mutual institutions and "qualifying supervisory goodwill," less intangible
assets other than certain supervisory goodwill and, subject to certain
limitations, mortgage and non-mortgage servicing rights, purchased credit card
relationships and credit-enhancing interest only strips. Tangible capital is
given the same definition as core capital but does not include qualifying
supervisory goodwill and is reduced by the amount of all the savings
institution's intangible assets except for limited amounts of mortgage servicing
assets. The OTS capital rule requires that core and tangible capital be reduced
by an amount equal to a savings institution's debt and equity investments in
"nonincludable" subsidiaries engaged in activities not permissible to national
banks, other than subsidiaries engaged in activities undertaken as agent for
customers or in mortgage banking activities and subsidiary depository
institutions or their holding companies. At December 31, 2002, WSFS was in
compliance with both the core and tangible capital requirements.
The risk weights assigned by the OTS risk-based capital regulation
range from 0% for cash and U.S. government securities to 100% for consumer and
commercial loans, non-qualifying mortgage loans, property acquired through
foreclosure, assets more than 90 days past due and other assets. In determining
compliance with the risk-based capital requirement, a savings institution may
include both core capital and supplementary capital in its total capital,
provided the amount of supplementary capital included does not exceed the
savings institution's core capital. Supplementary capital is defined to include
certain preferred stock issues, nonwithdrawable accounts and pledged deposits
that do not qualify as core capital, certain approved subordinated debt, certain
other capital instruments, general loan loss allowances up to 1.25% of
risk-weighted assets and up to 45% of unrealized gains on available-for-sale
equity securities with readily determinable fair values. Total capital is
reduced by the amount of the institution's reciprocal holdings of depository
institution capital instruments and all equity investments. At December 31,
2002, WSFS was in compliance with the OTS risk-based capital requirements.
Dividend Restrictions. As the subsidiary of a savings and loan holding
company, WSFS must submit notice to the OTS prior to making any capital
distribution (which includes cash dividends, stock repurchases and payments to
shareholders of another institution in a cash merger). In addition, a savings
association must make application to the OTS to pay a capital distribution if
(x) the association would not be adequately capitalized following the
distribution, (y) the association's total distributions for the calendar year
exceeds the association's net income for the calendar year to date plus its net
income (less distributions) for the preceding two years, or (z) the distribution
would otherwise violate applicable law or regulation or an agreement with or
condition imposed by the OTS.
Deposit Insurance. WSFS may be charged semi-annual premiums by the FDIC
for federal insurance on its insurable deposit accounts up to applicable
regulatory limits. The FDIC may establish an assessment rate for deposit
insurance premiums which protects the insurance fund and considers the fund's
operating expenses, case resolution expenditures, income and effect of the
assessment rate on the earnings and capital of members.
The assessment rate for an insured depository institution depends on
the assessment risk classification assigned to the institution by the FDIC which
is determined by the institution's capital level and supervisory evaluations.
Institutions are assigned to one of three capital groups -- well-capitalized,
adequately-capitalized or undercapitalized. Within each capital group,
institutions will be assigned to one of three subgroups on the basis of
supervisory evaluations by the institution's primary supervisory authority and
such other information as the FDIC determines to be relevant to the
institution's financial condition and the risk posed to the deposit insurance
fund.
Because the Bank Insurance Fund (BIF) currently exceeds its statutory
reserve ratio of 1.25% of insured deposits, most BIF members are not being
charged FDIC deposit insurance premiums for the first six months of 2003. In the
event that the BIF should fail to meet its statutory reserve ratio, the FDIC
would be required to set semi-annual assessment rates for BIF members that are
sufficient to increase the reserve ratio to 1.25% within one year or in
accordance with such other schedule that the FDIC adopts by regulation to
restore the reserve ratio in not more than 15 years. The FDIC continues to
assess BIF member institutions to fund interest payments on certain bonds issued
by the Financing Corporation (FICO), an agency of the federal government
established to help fund takeovers of insolvent thrifts. Until December 31,
1999, BIF members were assessed at approximately one-fifth the rate at which
Savings
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Association Insurance Fund (SAIF) members were assessed. After December 31,
1999, BIF and SAIF members are being assessed at the same rate for debt service
on the FICO bonds.
Federal Reserve System. Pursuant to regulations of the Federal Reserve
Board, a savings institution must maintain average daily reserves equal to 3% on
the first $42.1 million of transaction accounts, plus 10% on the remainder. This
percentage is subject to adjustment by the Federal Reserve Board. Because
required reserves must be maintained in the form of vault cash or in a
non-interest bearing account at a Federal Reserve Bank, the effect of the
reserve requirement may be to reduce the amount of the institution's
interest-earning assets. As of December 31, 2002 WSFS met its reserve
requirements.
-20-
ITEM 2. PROPERTIES
- ------------------
The following table sets forth the location and certain additional
information regarding the Company's offices and other material properties at
December 31, 2002.
Net Book Value
Of Property
Owned/ Date Lease or Leasehold
Location Leased Expires Improvements (2) Deposits
- -------- ------ ------- ---------------- --------
(In Thousands)
---------------------------
WSFS:
Main Office (1)(2) Owned $1,081 $211,623
9th & Market Streets
Wilmington, DE 19899
Union Street Branch Leased 2003 95 50,957
3rd & Union Streets
Wilmington, DE 19805
Trolley Square Branch Leased 2006 7 24,993
1711 Delaware Avenue
Wilmington, DE 19806
Fairfax Shopping Center Branch Leased 2003 11 66,957
2005 Concord Pike
Wilmington, DE 19803
Branmar Plaza Shopping Center Branch Leased 2003 9 63,991
1812 Marsh Road
Wilmington, DE 19810
Prices Corner Shopping Center Branch Leased 2003 30 86,477
3202 Kirkwood Highway
Wilmington, DE 19808
Pike Creek Shopping Center Branch Leased 2005 20 64,525
New Linden Hill & Limestone Roads
Wilmington, DE 19808
University Plaza Shopping Center Branch Leased 2003 8 40,325
I-95 & Route 273
Newark, DE 19712
College Square Shopping Center Branch (4) Leased 2007 242 68,549
Route 273 & Liberty Avenue
Newark, DE 19711
Airport Plaza Shopping Center Branch Leased 2013 15 68,171
144 N. DuPont Hwy.
New Castle, DE 19720
Stanton Branch Leased 2006 112 10,909
Inside ShopRite at First State Plaza
1600 W. Newport Pike
Wilmington, DE 19804
Glasgow Branch Leased 2008 162 18,863
Inside Genuardi's at Peoples Plaza
Routes 40 & 896
Newark, DE 19804
Middletown Square Shopping Center Leased 2004 32 15,832
Inside Parkers Thriftway
701 N. Broad St.
Middletown, DE 19709
Dover Branch Leased 2005 79 16,155
Inside Metro Food Market
Rt 134 & White Oak Road
Dover, DE 19901
-21-
Net Book Value
of Property
Owned/ Date Lease or Leasehold
Location Leased Expires Improvements (2) Deposits
-------- ------ ------- ---------------- --------
(In Thousands)
------------------------------
WSFS (continued...):
--------------------
Glen Eagle Branch Leased 2003 198 8,019
Inside Genaurdi's Family Market
475 Glen Eagle Square
Glen Mills, PA 19342
University of Delaware-Trabant University Center Leased 2003 183 7,605
17 West Main Street
Newark, DE 19716
Brandywine Branch Leased 2004 170 17,775
Inside Genaurdi's Family Market
2522 Foulk Road
Wilmington, DE 19810
Wal-Mart Branch Leased 2004 257 3,841
Route 40 & Wilton Boulevard
New Castle, DE 19720
Operations Center Owned 1,007 N/A
2400 Philadelphia Pike
Wilmington, DE 19703
Longwood Branch Leased 2005 188 3,329
830 E. Baltimore Pike
E. Marlborough, PA 19348
Holly Oak Branch Leased 2005 152 19,690
Inside Superfresh
2105 Philadelphia Pike
Claymont, DE 19703
Elkins Park Branch (7) Leased 2005 - -
More Shopping Center
7300 Old York Road
Elkins Park, PA 19027
Hockessin Branch Leased 2015 577 29,810
7450 Lancaster Pike
Wilmington, DE 19707
Dewey Beach-Loan Office Leased 2004 1 N/A
Ocean Winds Village
Dewey Beach, DE 19971
Middletown Crossing Shopping Center (6) Leased 2017 0 N/A
Route 299 and Silver Lake Road
Middletown, DE 19709
Fox Run Shopping Center (8) Leased 2006 126 N/A
Bear, DE
Wilmington National Finance: (5)
--------------------------------
6265 Southfront Road Leased 2005 - N/A
Livermore, CA
1833 Centre Point Drive Leased 2005 - N/A
Suite 123
Naperville, IL 60566
Suite 350 Leased 2005 - N/A
2260 Buler Pike
Plymouth Meeting, PA 19462
University Plaza-Bellevue Leased 2005 - N/A
262 Chapman Road
Newark, DE
175 Great Neck Road Leased 2003 - N/A
Suite 407
Great Neck, NY
-22-
Net Book Value
of Property
Owned/ Date Lease or Leasehold
Location Leased Expires Improvements (2) Deposits
-------- ------ ------- ---------------- --------
(In Thousands)
-----------------------------
Wilmington National Finance (continued...):
-------------------------------------------
Sunset Ridge Professional Plaza Leased 2004 - N/A
2920 N. Green Parkway
Henderson, NY
One University Plaza Leased 2004 - N/A
8301 JM Keynes Drive
Suite 400
Charlotte, NC
Suite 150 Leased 2004 - N/A
4800 River Green Parkway
Duluth, GA
WSFS Credit Corporation:
------------------------
30 Blue Hen Drive Leased 2007 276 N/A
Suite 200
Newark, DE 19713
Greenville, DE Property (3) Owned - 2,090 N/A
----------------------------
Wilmington Gateway: (3)
-----------------------
500 Delaware Ave. Owned - 5,663 N/A
Wilmington, DE 19801
---------
$ 898,396
=========
(1) Includes location of executive offices.
(2) The net book value of all the Company's investment in premises and
equipment totaled $13.8 million at December 31, 2002.
(3) The total includes building and building depreciation listed under Real
Estate Held for Investment.
(4) Includes the Company's Education and Development Center.
(5) Subsidiary was sold on January 2, 2003.
(6) Construction to begin in 2004.
(7) Branch was sold on September 30, 2002. Office is now sublet to independent
third-party.
(8) Construction to begin in 2003.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
There are no material legal proceedings to which the Company or WSFS is
a party or to which any of its property is subject except as discussed in Note
16 to the Consolidated Financial Statements.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
No matter was submitted to a vote of the stockholders during the fourth
quarter of the fiscal year ended December 31, 2002 through the solicitation of
proxies or otherwise.
-23-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- -----------------------------------------------------------------------------
The information contained under the section captioned "Market for
Registrants Common Equity and Related Stockholder Matters" in the 2002 Annual
Report to Stockholders (the "Annual Report") is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
(Dollars in Thousands, Except Per Share Data)
At December 31,
---------------
Total assets............................. $1,705,000 $1,913,920 $1,739,316 $1,751,037 $1,631,319
Net loans (1)............................ 1,197,032 1,115,372 963,491 860,573 739,462
Investment securities (2)................ 21,777 14,194 29,740 37,473 37,861
Investment in reverse mortgages, net..... 1,131 33,939 33,683 28,103 31,293
Other investments........................ 93,500 122,889 39,318 36,526 51,418
Mortgage-backed securities (2)........... 148,238 361,724 339,718 447,749 459,084
Deposits ................................ 898,396 1,146,117 1,121,591 910,090 858,300
Borrowings (3)........................... 466,006 595,480 443,638 672,465 622,409
Trust preferred borrowings............... 50,000 50,000 50,000 50,000 50,000
Stockholders' equity .................... 182,672 100,003 97,146 96,153 85,752
Number of full-service branches (4)(5)... 21 27 28 24 20
For the Year Ended December 31,
-------------------------------
Interest income.......................... $ 94,703 $ 101,338 $ 120,899 $ 108,012 $ 105,833
Interest expense......................... 33,434 46,597 59,499 58,840 59,775
Noninterest income ...................... 124,060 21,125 12,926 11,578 11,243
Noninterest expenses .................... 51,617 47,689 45,278 40,724 34,501
Income from continuing operations........ 88,018 17,762 18,457 18,587 15,388
Net income .............................. 101,141 17,083 11,019 19,709 16,512
Earnings per share:
Basic:
Income from continuing operations..... $ 9.69 $ 1.85 $ 1.73 $ 1.64 $ 1.25
Net income ........................... 11.13 1.78 1.03 1.74 1.34
Diluted:
Income from continuing operations..... 9.27 1.83 1.73 1.63 1.23
Net income ........................... 10.65 1.76 1.03 1.73 1.32
Interest rate spread..................... 4.97% 4.64% 5.01% 3.90% 3.78%
Net interest margin...................... 4.93 4.51 4.77 3.65 3.63
Return on average equity (6)............. 70.69 17.69 18.85 20.89 16.47
Return on average assets (6)............. 6.22 1.33 1.34 1.29 1.15
Average equity to average assets (6)..... 8.79 7.50 7.12 6.17 6.96
(1) Includes loans held-for-sale.
(2) Includes securities available-for-sale.
(3) Borrowings consist of FHLB advances and securities sold under
agreement to repurchase.
(4) WSFS closed one branch in 2001. WSFS opened four branches in
1998, 1999 and 2000.
(5) Six branches were transferred to other financial institutions in
2002.
(6) Based on continuing operations.
-24-
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------------------------------------------------------------------------------
OF OPERATIONS
-------------
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
The information contained in the section captioned "Market Risk" in the
Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLIMENTARY DISCLOSURES
- ----------------------------------------------------------
The Registrant's financial statements listed in Item 15 herein are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- --------------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The Information which appears under the heading "Section 16(a)
Beneficial Ownership Reporting Compliance" and "Proposal 1 - Election of
Directors" in the Registrant's definitive proxy statement for the registrant's
Annual Meeting of Stockholders to be held on April 24, 2003 (the "Proxy
Statement") which was filed with the Securities and Exchange Commission on March
26, 2003, is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
The information which appears under the heading "Proposal 1 - Election
of Directors" in the Proxy Statement is incorporated herein by reference.
-25-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
Information required by this item is incorporated herein by reference
to the section captioned "Voting Securities and Principal Holders
Thereof" of the Proxy Statement
(b) Security Ownership of Management
Information required by this item is incorporated herein by reference
to the section captioned "Proposal 1 -- Election of Directors --
Stock ownership of Management" of the Proxy Statement
(c) Management of the Company knows of no arrangements, including any
pledge by any person of securities of the Company, the operation of
which may at a subsequent date result in a change in control of the
registrant.
(d) Securities Authorized for Issuance Under Equity Compensation Plans
Set forth below is information as of December 31, 2002 with respect to
compensation plans under which equity securities of the Registrant are
authorized for issuance.
Equity Compensation Plan Information
(a) (b) (c)
Number of securities
Number of Securities Weighted-Average remaining available for
to be issued upon exercise price of future issuance under
exercise of outstanding outstanding equity compensation plans
Options, SARs and Options, SARs and (excluding securities
Phantom Stock Awards Phantom Stock Awards reflected in column (a)
-------------------- -------------------- -----------------------
Equity compensation plans
approved by stockholders (1) 1,080,060 $ 14.55 69,450
Equity compensation plans
not approved by stockholders n/a n/a n/a
--------- ------- ------
TOTAL 1,080,060 $ 14.55 69,450
========= ======= ======
(1) Plans approved by stockholders include the 1986 Stock Option Plan and
the 1997 Stock Option Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The information which appears under the heading "Business Relationships
and Related Transactions" in the Proxy Statement is incorporated herein by
reference.
-26-
ITEM 14. CONTROLS AND PROCEDURES
- --------------------------------
(a) Evaluation of disclosure controls and procedures. Based on their
evaluation as of a date within 90 days of the filing date of this Annual Report
on Form 10-K, the Registrant's principal executive officer and principal
financial officer have concluded that the Registrant's disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934 (the "Exchange Act")) are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.
(b) Changes in internal controls. There were no significant changes in
the Registrant's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------------------------------------------------------------------------
(a) Listed below are all financial statements and exhibits filed as part of
this report, and are incorporated by reference.
1. The consolidated statements of Condition of WSFS Financial
Corporation and subsidiary as of December 31, 2002 and 2001, and
the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in the
three year period ended December 31, 2002, together with the
related notes and the independent auditors' report of KPMG, LLP,
independent accountants.
2. Schedules omitted as they are not applicable.
The following exhibits are incorporated by reference herein or annexed to this
Annual Report:
Exhibit
Number Description of Document
- ------ -----------------------
3.1 Registrant's Certificate of Incorporation, as amended is incorporated
herein by reference to Exhibit 3.1 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994.
3.2 Bylaws of WSFS Financial Corporation are incorporated herein by reference
to Exhibit 3.2 of the Registrant's Registration Statement on Form S-1 (File
No. 33-45762) filed with the Commission on February 24, 1992.
4.1 Certificate of Trust of WSFS Capital Trust I, incorporated herein by
reference to Exhibit 4.2 to the Registration Statement on Form S-3,
Registration Nos. 333-56015, 333-56015-01 and 333-56015-02 filed by WSFS
Financial Corporation, WSFS Capital Trust I and WSFS Capital Trust II (the
"Registration Statement").
4.2 Trust Agreement of WSFS Capital Trust I, incorporated herein by reference
to Exhibit 4.4 to the Registration Statement.
-27-
4.3 Amended and Restated Trust Agreement of WSFS Capital I, incorporated herein
by reference to Exhibit 4.1 to WSFS Financial Corporation's Current Report
on Form 8-K/A, filed with the Securities and Exchange Commission on
November 20, 1998 ("Form 8-K/A").
4.4 Form of Trust Preferred Security Certificate of WSFS Capital Trust I,
incorporated herein by reference to Exhibit 4.3 to Form 8-K/A.
4.5 Trust Preferred Securities Guarantee Agreement, incorporated herein by
reference to the Form 8-K/A filed with the Securities and Exchange
Commission on November 20, 1998.
4.6 Form of Junior Subordinated Indenture between WSFS Financial Corporation
and Wilmington Trust Company, as trustee, incorporated herein by reference
to Exhibit 4.1 to the Registration Statement.
4.7 Officers' Certificate and Company Order for Floating Rate Junior
Subordinated Debentures due December 1, 2028, incorporated herein by
reference to Exhibit 4.2 to the Form 8-K/A.
4.8 Form of Floating Rate Junior Subordinated Debenture, incorporated herein by
reference to Exhibit 4.5 of the Form 8-K/A.
4.9 First Amendment to the Amended and Restated Trust Agreement of WSFS Capital
Trust I.
10.1 Wilmington Savings Fund Society, Federal Savings Bank 1986 Stock Option
Plan, as amended is incorporated herein by reference to Exhibit 4.1 of
Registrant's Registration Statement on Form S-8 (File No. 33-56108) filed
with the Commission on December 21, 1992.
10.2 WSFS Financial Corporation, 1994 Short Term Management Incentive Plan
Summary Plan Description is incorporated herein by reference to Exhibit
10.7 of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994.
10.3 Amended and Restated Wilmington Savings Fund Society, Federal Savings Bank
1997 Stock Option Plan is incorporated herein by reference to the
Registrant's Registration Statement on Form S-8 (File No. 333-26099) filed
with the Commission on April 29, 1997.
10.4 2000 Stock Option and Temporary Severance Agreement among Wilmington
Savings Fund Society, Federal Savings Bank, WSFS Financial Corporation and
Marvin N.
-28-
Schoenhals on February 24, 2000 is incorporated herein by reference
to Exhibit 10.4 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 2000
10.4.1 Severance Policy among Wilmington Savings Fund Society, Federal Savings
Bank and certain Executives dated March 13, 2001, as amended is
incorporated herein by reference to Exhibit 10.4.1 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 2001.
13 Portions of the Corporations 2002 Annual Report to Shareholders
21 Subsidiaries of Registrant.
23 Consent of KPMG LLP.
99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes- Oxley Act of 2002
Exhibits 10.1 through 10.5 represent management contracts or compensatory plan
arrangements.
(b) Reports on 8-K:
On November 6, 2002 the Registrant filed a Form 8-K pursuant to items 5
and 7 announcing the sale of its C1FN/Everbank branchless national banking
segment.
On November 7, 2002 the Registrant filed a Form 8-K pursuant to items 5
and 7 announcing that it had entered into a definitive agreement to sell its
majority interest in Wilmington Finance, Inc., an originator and seller of
non-conforming loans, majority owned by the Registrant.
On November 25, 2002, the Registrant filed a Form 8-K pursuant to items 5
and 7 announcing that it had sold substantially all of its reverse mortgage
loans to an affiliate of Lehman Brothers, the global investment bank, for
approximately $136 million, primarily in cash, after costs and expenses.
On January 2, 2003, the Registrant announced it had closed the previously
announced sale of its majority-owned subsidiary, Wilmington Finance, Inc., an
originator and seller of non- conforming loans.
-29-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 25, 2003 BY: /s/ Marvin N. Schoenhals
------------------------------
Marvin N. Schoenhals
Chairman and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 25, 2003 BY: /s/ Marvin N. Schoenhals
-----------------------------------
Marvin N. Schoenhals
Chairman and President
Date: March 25, 2003 BY: /s/ Charles G. Cheleden
-----------------------------------
Charles G. Cheleden
Vice Chairman and Director
Date: March 25, 2003 BY: /s/ John F. Downey
-----------------------------------
John F. Downey
Director
Date: March 25, 2003 BY: /s/ Linda C. Drake
-----------------------------------
Linda C. Drake
Director
Date: March 25, 2003 BY: /s/ David E. Hollowell
-----------------------------------
David E. Hollowell
Director
Date: March 25, 2003 BY: /s/ Joseph R. Julian
-----------------------------------
Joseph R. Julian
Director
-30-
Date: March 25, 2003 BY: /s/ Thomas P. Preston
-----------------------------------
Thomas P. Preston
Director
Date: March 25, 2003 BY: /s/ Claibourne D. Smith
-----------------------------------
Claibourne D. Smith
Director
Date: March 25, 2003 BY:
-----------------------------------
Eugene W. Weaver
Director
Date: March 25, 2003 BY: /s/ R. Ted Weschler
-----------------------------------
R. Ted Weschler
Director
Date: March 25, 2003 BY: /s/ Dale E. Wolf
-----------------------------------
Dale E. Wolf
Vice Chairman and Director
Date: March 25, 2003 BY: /s/ Mark A. Turner
-----------------------------------
Mark A. Turner
Chief Operating Officer and
Chief Financial Officer
Date: March 25, 2003 BY: /s/ Robert F. Mack
-----------------------------------
Robert F. Mack
Senior Vice President and Controller
-31-
WSFS FINANCIAL CORPORATION
Wilmington, Delaware
CERTIFICATION
Pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002
I, Marvin N. Schoenhals, Chairman, President and Chief Executive Officer of WSFS
Financial Corporation (the "Company"), hereby certify that:
1. I have reviewed the Annual Report on Form 10-K for the year ended December
31, 2002, of the Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Company as of, and for, the periods presented in this annual report;
4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rule 13a-14(c)) for the Company and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
(b) evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Company's other certifying officer and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the audit committee
of Company's board of directors:
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for
the Company's auditors any material weaknesses in internal controls;
and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal
controls; and
6. The Company's other certifying officer and I have indicated in this annual
report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: March 25, 2003 /s/Marvin N. Schoenhals
---------------------------
Marvin N. Schoenhals
Chairman and President
-32-
WSFS FINANCIAL CORPORATION
Wilmington, Delaware
CERTIFICATION
Pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002
I, Mark A. Turner, Chief Operating Officer and Chief Financial Officer, of WSFS
Financial Corporation (the "Company"), hereby certify that:
1. I have reviewed the Annual Report on Form 10-K for the year ended December
31, 2002, of the Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the Financial Statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Company as of, and for, the periods presented in this annual report;
4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rule 13a-14(c)) for the Company and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within the
those entities, particularly during the period in which this annual
report is being prepared;
(b) evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Company's other certifying officer and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the audit committee
of Company's board of directors:
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for
the Company's auditors any material weaknesses in internal controls;
and
(b) any fraud, whether or not material, that involves management or other
Associates who have a significant role in the Company's internal
controls; and
6. The Company's other certifying officer and I have indicated in this annual
report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: March 25, 2003 /s/Mark A. Turner
----------------------------
Mark A. Turner
Chief Operating Officer and
Chief Financial Officer
-33-