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UNITED STATES
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, 2004
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
incorporation or organization) Identification Number)
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. ( )
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 Marketsm as of June 30, 2004 was $205,374,000. 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 10, 2005, there were issued and outstanding 7,100,580
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 28, 2005 are incorporated by reference in Part
III hereof. Portions of the 2004 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 ............................................................................ 19
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
Item 9A. Controls and Procedures................................................................. 23
Item 9B. Other Information....................................................................... 25
Part III
Item 10. Directors and Executive Officers of the Registrant...................................... 25
Item 11. Executive Compensation.................................................................. 25
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder
Matters............................................................................... 25
Item 13. Certain Relationships and Related Transactions.......................................... 26
Item 14. Principal Accountant Fees and Services.................................................. 26
Item 15. Exhibits and Financial Statement Schedules.............................................. 26
Signatures.............................................................................. 29
-2-
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 its
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, the mid-Atlantic region and the country as a
whole, asset quality, loan growth, loan delinquency rates, operating risk,
uncertainty of estimates in general and changes in federal and state
regulations, among other factors. These factors should be considered in
evaluating the "forward-looking statements," and undue reliance should not be
placed on such statements. Actual results may differ materially from management
expectations. 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 173 years. WSFS is the largest thrift
institution headquartered in Delaware and the fifth largest financial
institution 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. The Federal Deposit Insurance Corporation (FDIC) insures deposits to
their legal maximum. WSFS serves customers primarily from its main office, 24
retail banking offices, loan production offices and operations centers located
in Delaware and southeastern Pennsylvania. The Corporation's website is
www.wsfsbank.com. The Corporation 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 From 8-K and amendments
to those reports pursuant to Section 13(a) of the Exchange Act.
The Corporation has two consolidated subsidiaries, WSFS and Montchanin
Capital Management, Inc. (Montchanin). The Corporation also has one
unconsolidated affiliate, WSFS Capital Trust I. The Corporation has no
unconsolidated subsidiaries or off-balance sheet entities. Fully-owned and
continuing consolidated subsidiaries of WSFS include WSFS Investment Group,
Inc., which markets various third-party insurance products and securities
through WSFS' retail banking system; and WSFS Reit, Inc., which holds qualifying
real estate assets and may be used in the future to raise capital.
-3-
In 2000, the Board of Directors approved management's plans to
discontinue the operations of WSFS Credit Corporation (WCC). At December 31,
2000 WCC had 7,300 lease contracts and 2,700 loan contracts, compared to 52
lease contracts and 223 loan contracts at December 31, 2004. WCC no longer
accepts new applications but continues to service existing loans and leases
until their maturity.
In addition to the wholly owned subsidiaries, in the past, WSFS had
consolidated two non-wholly owned subsidiaries, CustomerOne Financial Network,
Inc. (C1FN) and Wilmington Finance, Inc. (WF). C1FN, then 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 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 Management's Discussion and Analysis of
Financial Condition and Results of Operations (MD&A), and Note 3 to the
Financial Statements of the Corporation's 2004 Annual Report to Shareholders
(Annual Report). These divestitures were consistent with strategic actions of
WSFS to simplify its operations and better focus resources and capital on WSFS'
core bank.
Montchanin has one consolidated non-wholly owned subsidiary, Cypress
Capital Management LLC (Cypress). Cypress, a 60% owned subsidiary is a
Wilmington based investment advisory firm serving high net-worth individuals and
institutions.
COMPETITION
WSFS is the second largest independent full service banking institution
headquartered and operating in Delaware. It attracts retail and commercial
deposits primarily through its system of 24 banking offices at December 31,
2004. Nineteen banking offices are located in northern Delaware's New Castle
County, WSFS' primary market. In addition to its business deposits, these
banking offices maintain approximately 135,000 total deposit account
relationships with approximately 48,000 total households in New Castle County,
or 26% of all households in New Castle County, Delaware. Two banking offices are
in the state capital, Dover, located in central Delaware's Kent County and one
banking office is located in southern Delaware's Sussex County. Two other
banking offices are located in southeastern Pennsylvania. In addition to its
banking offices, WSFS also attracts commercial loans through its loan production
offices.
The competition for deposit and loan 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.
SUBSIDIARIES
The Corporation has two consolidated subsidiaries, WSFS and Montchanin.
The Corporation also has one unconsolidated affiliate, WSFS Capital Trust I. The
Corporation has no unconsolidated subsidiaries or off-balance sheet entities.
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, 2004, WSFS had three wholly-owned, first-tier
subsidiaries WSFS Investment Group, WSFS Reit, Inc and WCC. In addition to the
wholly owned subsidiaries, at December 31, 2002, the Corporation consolidated a
non-wholly owned subsidiary, WF. 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 2004 Annual Report.
-4-
WSFS 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' retail
banking system. WSFS Reit, Inc. is a real estate investment trust formed in 2002
to hold qualifying real estate assets and may be used in the future to raise
capital. WCC is engaged primarily in indirect motor vehicle leasing. In 2000,
the Corporation approved plans to discontinue the operations of WCC. WCC, which
had 52 lease contracts and 223 loan contracts at December 31, 2004, no longer
accepts new applications but continues to service existing loans and leases
until their maturity. For a detailed discussion, see the Discontinued Operations
section of the MD&A and Note 2 to the Financial Statements of the Corporation's
2004 Annual Report.
Montchanin was formed in late 2003 to provide asset management services
in the Corporation's primary market area. In January 2004, Montchanin acquired a
60% interest in Cypress. Cypress is a Wilmington based investment advisory firm
servicing high net-worth individuals and institutions.
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
the MD&A.
INVESTMENT ACTIVITIES
The Corporation'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,
---------------------------------------------------------------------------
2004 2003 2002
---------------------- ------------------------ ----------------------
Percent Percent Percent
of of of
Amount Assets Amount Assets Amount Assets
------ --------- ------ ---------- ------ ----------
(Dollars In Thousands)
Held-to-Maturity:
- -----------------
Corporate bonds............................. $ 310 -% $ 310 -% $ 310 -%
State and political subdivisions ........... 7,457 0.3 10,100 0.5 10,414 0.6
-------- --- -------- --- -------- ---
7,767 0.4 10,410 0.5 10,724 0.6
-------- --- -------- --- -------- ---
Available-for-Sale:
- -------------------
Reverse Mortgages........................... (109) - 193 - 1,131 0.1
U.S. Government and agencies................ 89,718 3.6 105,885 4.8 11,053 0.7
-------- --- -------- --- -------- ---
89,609 3.6 106,078 4.8 12,184 0.7
-------- --- -------- --- -------- ---
Short-term investments:
- -----------------------
Federal funds sold and securities purchased
under agreements to resell.............. - - - - 64,045 3.8
Interest-bearing deposits in other banks (1) 531 - 1,095 - 7,476 0.4
-------- --- -------- --- -------- ---
531 - 1,095 - 71,521 4.2
-------- --- -------- --- -------- ---
$ 97,907 3.9% $117,583 5.3% $ 94,429 5.5%
======== === ======== === ======== ===
(1) Interest-bearing deposits in other banks do not include deposits with a
maturity greater than one year.
Proceeds from the sale of investment securities classified as
available-for-sale during 2004 were $25.1 million, with a gain of $1,000
realized on these sales. Municipal bonds totaling $2,678,267 were called by the
issuers. Proceeds from the sale of investments during 2003 and 2002 were $21.3
million and $1.8 million respectively. There was a net gain
-5-
of $200,000 realized on sales in 2003 and $15,000 loss realized on sales in
2002. The cost basis for all investment security sales was based on the specific
identification method. There were no sales of investment securities classified
as held-to-maturity.
The following table sets forth the terms to maturity and related
weighted average yields of investment securities and short-term investments at
December 31, 2004. Substantially all of the related interest and dividends
represent taxable income.
At December 31, 2004
--------------------
Weighted
Average
Amount Yield (1)
------ ---------
(Dollars in Thousands)
Held-to-Maturity:
-----------------
Corporate bonds:
Within one year...................................... $ 62 6.80%
After one but within five years...................... 62 7.05
After five but within ten years...................... 62 7.32
After ten years...................................... 124 7.52
---------
310 7.24
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State and political subdivisions (2):
Within one year...................................... $ 2,493 7.20
After one but within five years...................... 2,037 7.33
After five but within ten years...................... 1,390 7.53
After ten years...................................... 1,537 5.24
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7,457 6.89
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Total debt securities, held-to-maturity................ 7,767 6.91
---------
Available-for-Sale:
-------------------
Reverse Mortgages (3):
Within one year...................................... $ (109) -
---------
(109) -
---------
U.S. Government and agencies:
Within one year...................................... $ 3,971 2.17
After one but within five years...................... 85,747 2.46
---------
89,718 2.45
---------
Total debt securities.................................. 97,485 2.80
---------
Short-term investments:
-----------------------
Interest-bearing deposits in other banks............. 531 2.02
---------
Total short-term investments........................... 531 2.02
---------
$ 97,907 2.80%
=========
(1) Reverse mortgages have been excluded from weighted average yield
calculations because income can vary significantly from reporting period to
reporting period due to the volatility of factors used to value the
portfolio.
(2) Yields on state and political subdivisions are not calculated on a
tax-equivalent basis since the effect would be immaterial.
(3) Reverse mortgages do not have contractual maturities. The Corporation has
included reverse mortgages in maturities within one year.
-6-
In addition to the foregoing investment securities, the Corporation has
maintained an investment portfolio of mortgage-backed securities, $11.9 million
of which is classified as "trading." At December 31, 2004 mortgage-backed
securities with a par value of $367.6 million were pledged as collateral for
retail customer repurchase agreements, municipal deposits and Federal Home Loan
Bank advances. Accrued interest receivable for mortgage-backed securities was
$1.9 million and $2.0 million at December 31, 2004 and 2003, respectively.
Proceeds from the sale of mortgage-backed securities classified as
available-for-sale were $51.3 million in 2004, resulting in a net gain of
$248,000.
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,
------------------------------------------------------------------------
2004 2003 2002
--------------------- ----------------- ------------------------
(Dollars in Thousands)
Amount Rate Amount Rate Amount Rate
------ ------ ------ ------ ------ -----
Held-to-Maturity:
- -----------------
Collateralized mortgage obligations ........ $ - -% $ 1,785 6.32% $ 13,881 6.90%
FNMA........................................ - - - - 11,614 5.15
FHLMC....................................... 4 6.06 29 8.13 13,662 5.53
--------- ---- -------- ---- ------- ----
$ 4 6.06% $ 1,814 6.18% $ 39,157 5.90%
========= ==== ======== ==== ======= ====
Available-for-Sale:
- -------------------
Collateralized mortgage obligations......... 401,231 4.38% 390,467 4.29% $84,735 4.68%
FNMA........................................ 58,650 3.86 70,345 3.90 13,346 4.74
FHLMC....................................... 33,788 3.80 37,936 3.70 - -
GNMA........................................ 18,520 4.15 18,463 4.28 - -
--------- ---- -------- ---- ------- ----
$ 512,189 4.27% $517,211 4.19% $98,081 4.69%
========= ==== ======== ==== ======= ====
Trading:
- --------
Collateralized mortgage obligations......... $ 11,951 5.32% $ 11,527 4.14% $11,000 4.42%
========= ==== ======== ==== ======= ====
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 small- and
medium-sized businesses and consumers in and around the state of Delaware.
-7-
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 Corporation had no concentrations of loans exceeding 10% of total
loans at December 31, 2004:
December 31,
-------------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
--------------------- -------------------- --------------------- ------------------- ----------------
Types of Loans Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
- -------------- ------ ------- ------ ------- ------ ------- ------ ------- ------ -------
(Dollars in Thousands)
Residential real estate (1) $ 443,023 28.9% $ 458,408 35.1% $ 541,465 45.2% $ 487,845 43.7 $440,136 45.7%
Commercial real estate:
Commercial mortgage......... 416,287 27.1 335,050 25.7 228,089 19.1 208,286 18.7 190,707 19.8
Construction................ 120,604 7.9 54,742 4.2 59,555 5.0 48,002 4.3 30,183 3.1
---------- ----- ---------- ------ ---------- ----- ---------- ----- -------- -----
Total commercial
real estate............ 536,891 35.0 389,792 29.9 287,644 24.1 256,288 23.0 220,890 22.9
Commercial.................. 368,752 24.0 292,516 22.4 209,567 17.5 197,790 17.7 151,887 15.7
Consumer.................... 210,959 13.7 186,133 14.3 181,851 15.2 198,366 17.8 175,268 18.2
---------- ----- ---------- ------ ---------- ----- ---------- ----- -------- -----
Gross loans................. 1,559,625 101.6 1,326,849 101.7 1,220,527 102.0 1,140,289 102.2 988,181 102.5
Less:
(Deferred fees)
unearned income........... (64) 0.0 (414) 0.0 2,043 0.2 3,320 0.3 3,268 0.3
Allowance for loan losses... 24,222 1.6 22,386 1.7 21,452 1.8 21,597 1.9 21,423 2.2
---------- ----- ---------- ------ ---------- ----- ---------- ----- -------- -----
Net loans.................. $1,535,467 100.0% $1,304,877 100.0% $1,197,032 100.0% $1,115,372 100.0% $963,490 100.0%
========== ===== ========== ====== ========== ===== ========== ===== ======== =====
(1) Includes $3,249, $1,465, $121,349, $84,691, and $23,274 of residential
mortgage loans held-for-sale at December 31, 2004, 2003, 2002, 2001, and
2000, respectively.
-8-
The following table sets forth information as of December 31, 2004
regarding the amount of loans maturing in the Corporation'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 whether the loan has a fixed or adjustable rate.
Loans having no stated maturity or repayment schedule are reported in the Less
than One Year category.
Less than One to Over
One Year Five Years Five Years Total
-------- ---------- ---------- -----
(In Thousands)
Real estate loans (1)....... $ 57,738 $ 323,685 $ 474,638 $ 856,061
Construction loans.......... 33,025 84,429 3,150 120,604
Commercial loans............ 153,306 136,285 79,161 368,752
Consumer loans ............. 84,979 54,043 71,937 210,959
----------- ----------- ---------- -----------
$ 329,048 $ 598,442 $ 628,886 $ 1,556,376
=========== =========== ========== ===========
Rate sensitivity:
Fixed..................... $ 46,204 $ 173,205 $ 243,393 $ 462,802
Adjustable................ 282,844 425,237 385,493 1,093,574
----------- ----------- ---------- -----------
Gross loans................. $ 329,048 $ 598,442 $ 628,886 $ 1,556,376
=========== =========== ========== ===========
(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 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 100%. 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, 2004, the balance of all such loans was
approximately $11.5 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 Corporation 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' adjustable-rate residential real estate loans
have interest rates that adjust yearly, after an initial period. Typically, 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.
-9-
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 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 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 Corporation 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 prime rate or LIBOR, in most
cases, and adjusted periodically as these rates change. 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, 2004, $175.7 million was
committed for construction loans, of which $120.6 million had been disbursed.
-10-
WSFS' commercial lending, excluding real estate loans, includes loans
for the purpose of working capital, financing equipment acquisitions, business
expansion and other business purposes. These loans generally range in amounts up
to $10 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 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 construction projects progress. 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
plans 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. At December 31, 2004, WSFS
had a $35.0 million loan to refinance an employee stock ownership plan ("ESOP")
loan of a company. The loan payments are 100% secured by discounted U.S.
Treasury securities. This company also provides an unsecured guarantee of a loan
for an affiliate in the amount of $2.7 million at December 31, 2004. At December
31, 2004, no borrower had collective outstandings exceeding the above limits.
Consumer Lending.
The primary consumer credit products of the Corporation are
equity-secured installment loans and home equity lines of credit. At December
31, 2004, WSFS had equity-secured installment loans totaling $131.9 million,
which represented 63% of total consumer loans. A home equity line of credit
grants a borrower a line of credit of up to 100% of the appraised value (net of
any senior mortgages) of their 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, 2004, WSFS had extended $128.4 million in
home equity lines of credit, of which $56.8 million had been drawn at that 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 Corporation to the risk that falling
collateral values may leave it inadequately secured, the Corporation has not had
any significant adverse experience to date.
-11-
The table below sets forth consumer loans by type, in amounts and percentages at
the dates indicated.
December 31,
-------------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
-------------------- -------------------- ------------------ ---------------- ----------------
(Dollars in Thousands)
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
Equity secured
installment loans....... $131,935 62.6% $124,411 66.9% $ 123,655 68.1% $ 125,597 63.3% $ 113,686 64.8%
Home equity lines of credit 56,755 26.9 39,858 21.4 31,512 17.3 24,161 12.2 24,408 13.9
Automobile................. 5,126 2.4 9,137 4.9 11,728 6.4 11,737 5.9 9,762 5.6
Unsecured lines of credit.. 9,338 4.4 10,506 5.6 12,402 6.8 20,156 10.2 16,739 9.6
Other...................... 7,805 3.7 2,221 1.2 2,554 1.4 16,715 8.4 10,673 6.1
-------- ----- -------- ----- --------- ----- --------- ----- --------- -----
Total consumer loans ...... $210,959 100.0% $186,133 100.0% $ 181,851 100.0% $ 198,366 100.0% $ 175,268 100.0%
======== ===== ======== ===== ========= ===== ========= ===== ========= =====
-12-
Loan Originations, Purchase and Sales.
Traditionally, WSFS has 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 2004, the Corporation originated $376 million of residential
real estate loans. This compares to originations of $317 million in 2003. 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 $68.4 million for the year ended December 31,
2004 and $128 million for 2003. Residential real estate loan sales totaled $51.1
million in 2004, $116 million in 2003 and $1.8 billion in 2002, of which WF
represented $1.7 billion in 2002. 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, 2004, WSFS serviced approximately $245 million of
residential loans for others compared to $245 million at December 31, 2003. The
Corporation also services residential loans for its portfolio totaling $412
million and $413 million at December 31, 2004 and 2003, respectively.
WSFS originates commercial real estate and commercial loans through its
commercial lending division. Commercial loans are made for the purpose of
working capital, financing equipment acquisitions, business expansion and other
business purposes. During 2004, WSFS originated $547 million of commercial and
commercial real estate loans compared with $245 million in 2003. 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 2004, consumer loan originations amounted to $16.8 million
compared to $41 million in 2003.
All loans to one borrowing relationship exceeding $3 million must be
approved by the senior management loan committee. The Executive Committee of the
Board of Directors approves the minutes of the management loan committee
meetings and approves individual loans exceeding $5 million to one borrowing
relationship. Individual Officers of WSFS have the authority to approve smaller
loan amounts, depending upon their experience and management position. The
Bank's credit policy includes a "House Limit" to one borrowing relationship of
50% of its legal lending limit or approximately $18 million.
Fee Income from Lending Activities.
WSFS earns 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.
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.
-13-
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, 2004. Loan fees
other than those considered adjustments of yield (such as prepayment charges
and late charges) are reported as loan fee income, a component of noninterest
income.
LOAN LOSS EXPERIENCE, PROBLEM ASSETS AND DELINQUENCIES
The Corporation'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 the
ultimate collectibility of principal and interest.
The Corporation endeavors to manage its portfolios to identify problem
loans as promptly as possible and take immediate actions to minimize losses. To
accomplish this, WSFS' Risk Management Department monitors the asset quality of
the Corporation'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 of deposit 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 24 retail banking offices at December 31, 2004. Nineteen banking
offices are located in northern Delaware's New Castle County, WSFS' primary
market. These banking offices maintain approximately 135,000 total account
relationships with approximately 48,000 total households, or 26% of all
households in New Castle County, Delaware. Two banking offices are in the state
capital, Dover, located in central Delaware's Kent County. One banking office is
in Rehoboth located in Delaware's Sussex County and two other banking offices
are located in southeastern Pennsylvania.
-14-
The following table sets forth the amount of certificates of deposit of
$100,000 or more by remaining maturity at the December 31, 2004:
December 31,
Maturity Period 2004
- --------------- ------------
(In Thousands)
Less than 3 months...................... $54,247
Over 3 months to 6 months............... 6,096
Over 6 months to 12 months.............. 6,021
Over 12 months.......................... 50,053
--------
$116,417
========
Borrowings. The Corporation utilizes several borrowing sources to fund
operations. As a member of the FHLB of Pittsburgh, WSFS is authorized to apply
for advances on the security of the Bank's capital stock ownership in the FHLB
and certain of the Bank's 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 the Bank's 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 Corporation's unconsolidated affiliate, WSFS Capital Trust
I, issued $51.5 million in Trust Preferred securities due December 11, 2028. For
a discussion of the Trust Preferred securities see Note 11 of the Consolidated
Financial Statements of the Corporations 2004 Annual Report.
PERSONNEL
As of December 31, 2004 the Registrant had 490 fulltime equivalent
Associates (employees). The Associates are not represented by a collective
bargaining unit. Management believes its relationship with its Associates is
good.
REGULATION
Regulation of the Corporation
Sarbanes-Oxley Act of 2002. On July 30, 2002, President Bush signed
into law the Sarbanes-Oxley Act of 2002 (the "Act"). The Securities and Exchange
Commission (the "SEC") has promulgated new regulations pursuant to the Act and
may 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 publicly-traded companies to additional and more
cumbersome reporting regulations and disclosure. Compliance with the Act and
corresponding regulations may increase the Corporation's expenses.
-15-
General. The Corporation 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 Corporation and other affiliates.
Activities Restrictions. Because the Corporation became a unitary
savings and loan holding company prior to May 4, 1999, there generally are no
restrictions on its activities. If the Corporation 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 Corporation) 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.
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.
-16-
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 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
"non-includable" 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, 2004, WSFS was in
compliance with both the core and tangible capital requirements.
-17-
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, non-withdrawable 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,
2004, 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) achieved its statutory reserve
ratio of 1.25% of insured deposits, the FDIC has eliminated deposit insurance
premiums for most BIF members. 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. Currently, 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, 2004 WSFS met its reserve
requirements.
-18-
ITEM 2. PROPERTIES
- ------------------
The following table sets forth the location and certain additional
information regarding the Corporation's offices and other material properties at
December 31, 2004.
Net Book Value
of Property
Owned/ Date Lease or Leasehold
Location Leased Expires Improvements (1) Deposits
- -------- ------ ------- ---------------- --------
(In Thousands)
-----------------------------------
WSFS:
Main Office (2) Owned $943 $463,436
9th & Market Streets
Wilmington, DE 19899
Union Street Branch Leased 2008 82 47,986
3rd & Union Streets
Wilmington, DE 19805
Trolley Square Branch Leased 2006 11 28,249
1711 Delaware Avenue
Wilmington, DE 19806
Fairfax Shopping Center Branch Leased 2008 5 66,021
2005 Concord Pike
Wilmington, DE 19803
Branmar Plaza Shopping Center Branch Leased 2008 7 68,760
1812 Marsh Road
Wilmington, DE 19810
Prices Corner Shopping Center Branch Leased 2008 22 91,582
3202 Kirkwood Highway
Wilmington, DE 19808
Pike Creek Shopping Center Branch Leased 2005 27 71,338
New Linden Hill & Limestone Roads
Wilmington, DE 19808
University Plaza Shopping Center Branch Leased 2008 20 42,956
I-95 & Route 273
Newark, DE 19712
College Square Shopping Center Branch (3) Leased 2007 210 73,236
Route 273 & Liberty Avenue
Newark, DE 19711
Airport Plaza Shopping Center Branch Leased 2013 20 64,239
144 N. DuPont Hwy.
New Castle, DE 19720
Stanton Branch Leased 2006 58 13,107
Inside ShopRite at First State Plaza
1600 W. Newport Pike
Wilmington, DE 19804
Glasgow Branch Leased 2008 101 18,936
Inside Genuardi's at Peoples Plaza
Routes 40 & 896
Newark, DE 19804
Middletown Crossing Shopping Center (4) Leased 2017 1,192 20,260
Route 299 and Silver Lake Road
Middletown, DE 19709
Dover Branch Leased 2005 29 16,674
Inside Metro Food Market
Rt 134 & White Oak Road
Dover, DE 19901
-19-
Net Book Value
of Property
Owned/ Date Lease or Leasehold
Location Leased Expires Improvements (1) Deposits
-------- ------ ------- ---------------- --------
(In Thousands)
----------------------------------
WSFS (continued...):
--------------------
West Dover Loan Office Leased 2009 8 N/A
Greentree Office Center
160 Greentree Drive
Suite 105
Dover, DE 19904
Blue Bell Loan Office Leased 2005 - N/A
550 Township Line Road
Suite 400
Blue Bell, PA 19422
Glen Eagle Branch Leased 2008 137 7,076
Inside Genaurdi's Family Market
475 Glen Eagle Square
Glen Mills, PA 19342
University of Delaware-Trabant University Center Leased 2008 169 9,008
17 West Main Street
Newark, DE 19716
Brandywine Branch Leased 2009 121 19,786
Inside Genaurdi's Family Market
2522 Foulk Road
Wilmington, DE 19810
Wal-Mart Branch Leased 2009 245 6,137
Route 40 & Wilton Boulevard
New Castle, DE 19720
Operations Center Owned 887 N/A
2400 Philadelphia Pike
Wilmington, DE 19703
Longwood Branch Leased 2005 143 6,004
830 E. Baltimore Pike
E. Marlborough, PA 19348
Holly Oak Branch Leased 2005 113 19,270
Inside Superfresh
2105 Philadelphia Pike
Claymont, DE 19703
Hockessin Branch Leased 2015 656 35,638
7450 Lancaster Pike
Wilmington, DE 19707
Dewey Beach-Loan Office Leased 2005 8 N/A
Ocean Winds Village
Dewey Beach, DE 19971
Fox Run Shopping Center Leased 2006 1,192 10,837
Bear, DE
Camden Town Center (4) Leased 2024 1,219 4,620
4566 S. Dupont Highway
Camden, DE 19934
Rehoboth Leased 2029 1,094 29,806
Lighthouse Plaza
Route #1
Rehoboth, DE 19971
Loan Operations Leased 2007 164 N/A
30 Blue Hen Drive, Suite 200
Newark, DE 19713
-20-
Net Book Value
of Property
Owned/ Date Lease or Leasehold
Location Leased Expires Improvements (1) Deposits
-------- ------ ------- ---------------- --------
(In Thousands)
--------------------------------------
Cypress Capital Management, LLC Leased 2010 5 N/A
-------------------------------
1220 Market Street
Suite 704
Wilmington, DE 19801
WSFS Reit, Inc. Leased 2005 - -
---------------
227 East Main Street
Elkton, MD 21921
Friess Building (5) Owned - 1,935 N/A
3908 Kennett Pike
Greenville, DE
Wilmington Gateway (5) (6)
500 Delaware Ave. Owned - 5,306 N/A
Wilmington, DE 19801
Fairfax Building (7) Owned 6,319 N/A
2005 Concord Pike
Wilmington, DE 19801
-----------
$ 1,234,962
===========
(1) The net book value of all the Corporation's investment in premise and
equipment totaled $22.8 million at December 31, 2004.
(2) Includes location of executive offices.
(3) Includes the Corporation's Education and Development Center.
(4) Middletown and Camden Branches opened in November 2004.
(5) Property transferred to WSFS Reit, Inc. in 2002.
(6) The total includes building and building depreciation listed under Real
Estate Held for Investment
(7) Purchased WSFS Fairfax Office and adjacent property in August 2004.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
There are no material legal proceedings to which the Corporation or
WSFS is a party or to which any of its property is subject.
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, 2004 through the solicitation of
proxies or otherwise.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
- --------------------------------------------------------------------------------
ISSUER PURCHASES OF EQUITY SECURITIES
------------------------------------------------------------------------
The information contained under the section captioned "Market for
Registrant's Common Equity and Related Stockholder Matters" in the 2004 Annual
Report to Stockholders (the "Annual Report") is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
(Dollars in Thousands,Except Per Share Data
At December 31,
---------------
Total assets..................................... $2,502,956 $2,207,077 $1,705,000 $1,913,920 $1,739,316
Net loans (1).................................... 1,535,467 1,304,877 1,197,032 1,115,372 963,491
Investment securities (2)........................ 97,485 116,295 21,777 14,194 29,740
Investment in reverse mortgages, net............. (109) 1931,131 33,939 33,683
Other investments................................ 44,477 44,771 93,500 122,889 39,318
Mortgage-backed securities (2)................... 524,144 530,552 148,238 361,724 339,718
Deposits ........................................ 1,234,962 923,333 898,396 1,146,117 1,121,591
Borrowings (3)................................... 1,002,609 1,031,058 466,006 595,480 443,638
Trust preferred borrowings....................... 51,547 50,000 50,000 50,000 50,000
Stockholders' equity ............................ 196,303 187,992 182,672 100,003 97,146
Number of full-service branches (4).............. 24 23 21 27 28
For the Year Ended December 31,
-------------------------------
Interest income.................................. $ 104,110 $ 89,299 $ 94,703 $ 101,338 $ 120,899
Interest expense................................. 37,246 31,301 33,434 46,597 59,499
Noninterest income .............................. 31,950 26,166 124,060 21,125 12,926
Noninterest expenses ............................ 55,699 49,417 51,617 47,689 45,278
Income from continuing operations................ 25,757 21,233 88,018 17,762 18,457
Net income ...................................... 25,900 63,022 101,141 17,083 11,019
Earnings per share:
Basic:
Income from continuing operations............. $ 3.60 $ 2.73 $ 9.69 $ 1.85 $ 1.73
Net income ................................... 3.62 8.11 11.13 1.78 1.03
Diluted:
Income from continuing operations............. 3.39 2.58 9.34 1.84 1.73
Net income ................................... 3.41 7.65 10.73 1.77 1.03
Interest rate spread............................. 3.07% 3.02% 4.97% 4.64% 5.01%
Net interest margin.............................. 3.24 3.29 4.93 4.51 4.77
Return on average equity (5)..................... 13.54 10.60 70.69 17.69 18.85
Return on average assets (5)..................... 1.10 1.09 6.22 1.33 1.34
Average equity to average assets (5)............. 8.13 10.28 8.79 7.50 7.12
(1) Includes loans held-for-sale.
(2) Includes securities available-for-sale.
(3) Borrowings consist of FHLB advances, securities sold under agreement to
repurchase and other borrowed funds.
(4) WSFS opened one branch in 2004, opened two branches in 2003, transferred
six branches to other financial institutions in 2002, and closed one branch
in 2001.
(5) Based on continuing operations.
-22-
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 SUPPLEMENTARY 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
ITEM 9A. CONTROLS AND PROCEDURES
- --------------------------------
Disclosure Controls and Procedures
The Corporation's management evaluated, with the participation of the
Corporation's Chief Executive Officer and Chief Financial Officer, the
effectiveness of the Corporation's disclosure controls and procedures as of the
end of the period covered by this report. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Corporation's
disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Corporation in the reports that it files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
-23-
Internal Control Over Financial Reporting
Management's report on the Corporation's internal control over
financial reporting appears in the Annual Report and is incorporated herein by
reference.
The attestation report of KPMG LLP on management's assessment of the
Corporation's internal control over financial reporting appears in the Annual
Report and is incorporated herein by reference.
During the last quarter of the year under report, there was no change
in the Corporation's internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, the
Corporation's internal control over financial reporting.
Appointment of Certifying Officer Subsequent to Design of Disclosure Controls
and Procedures and Internal Control Over Financial Reporting
Stephen A. Fowle was appointed to his position as CFO in January of
2005. Along with the Company's principal executive officer, as the principal
financial officer of the Company, he is responsible for establishing and
maintaining the Company's disclosure controls and procedures (as defined in
Exchange Act Rule 13a-15(e)) and the Company's internal control over financial
reporting (as defined in Exchange Act Rule 13a-15(f)).
Since the time of his appointment and prior to the filing of this
Annual Report on Form 10-K, Mr. Fowle has taken such measures as have been
necessary to gain comfort (i) that the disclosure controls and procedures at the
Company exist and are effective in ensuing that material information relating to
the Company, including its consolidated subsidiaries, that is required to be
disclosed in the reports that the Company files or submits under the Securities
Exchange Act of 1934 is made known to him by others within those entities within
the time periods specified in the SEC's rules and forms and (ii) that the
internal control over financial reporting at the Company exist and are effective
in providing reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.
Paragraphs 4 (a) and (b) of the certification filed as Exhibit 31 to
this Annual Report on Form 10-K pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 state that the certifying officer, which the SEC requires to be the
CFO at the time of the filing, has "designed such disclosure controls and
procedures or caused such disclosure controls and procedures to be designed
under [his] supervision" and has "designed such internal control over financial
reporting or caused such internal control over financial reporting to be
designed under [his] supervision." This implies that the certifying officer
------------------------------------------
served in his position as the principal executive or principal financial officer
- --------------------------------------------------------------------------------
of the issuer during the period when the issuer's disclosure controls and
- --------------------------------------------------------------------------------
procedures and internal control over financial reporting were designed.
- --------------------------------------------------------------------------------
As a result of guidance from the SEC that the wording of the Section
302 Certification may not be altered, the Company and Mr. Fowle must interpret
the wording in the certification to mean that Mr. Fowle, although not having
designed or caused either the Company's disclosure controls and procedures or
the Company's internal control over financial reporting, has taken such steps as
are necessary to gain comfort as to the statements in the Section 302
Certification (i) that the disclosure controls and procedures previously
designed are existent and effective to ensure that material information required
to be disclosed in the reports that the Company files or submits under the
Securities Exchange Act of 1934 is made know to him by others and (ii) that the
internal control over financial reporting previously designed is existent and
effective to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Mr. Fowle has been
able to give the unaltered Section 302 Certification only pursuant to this
interpretation because a statement that he "designed or caused to be designed"
would be factually incorrect.
-24-
ITEM 9B. OTHER INFORMATION
- --------------------------
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The Information which appears under the heading "Section 16a 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 28, 2005 (the "Proxy Statement") is
incorporated herein by reference.
The Corporation has adopted a Code of Ethics that applies to its principal
executive officer, principal financial officer, principal accounting officer or
controller or persons performing similar functions. A copy of the Code of Ethics
is posted on the Corporation's website at www.wsfsbank.com.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
The information which appears under the heading "Proposal I - Election of
Directors" in the Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
- --------------------------------------------------------------------------------
RELATED SHAREHOLDER MATTERS
---------------------------
(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 Corporation knows of no arrangements, including any
pledge by any person of securities of the Corporation, the operation of
which may at a subsequent date result in a change in control of the
registrant.
-25-
(d) Securities Authorized for Issuance Under Equity Compensation Plans
Set forth below is information as of December 31, 2004 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 and Options and (excluding securities
Phantom Stock Awards Phantom Stock Awards reflected in column (a)
-------------------- -------------------- -----------------------
Equity compensation plans
approved by stockholders (1) 873,360 $ 23.48 373,860
Equity compensation plans
not approved by stockholders n/a n/a n/a
------- ------- -------
TOTAL 873,360 $ 23.48 373,860
======= ======= =======
(1) Plans approved by stockholders include the 1986 Stock Option Plan and the
1997 Stock Option Plan, as amended.
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.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
- ------------------------------------------------
The information called for by this item is incorporated herein by
reference to the section entitled "Independent Public Accountants" in the Proxy
Statement.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
- ----------------------------------------------------
(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, 2004 and 2003, 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, 2004, together with the related notes and the independent
auditors' report of KPMG LLP, independent accountants.
2. Schedules omitted as they are not applicable.
-26-
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 Amended and Restated Bylaws of WSFS Financial Corporation, incorporated
herein by reference to Exhibit 3.2 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 2003.
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.
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 the 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.
-27-
4.9 First Amendment to the Amended and Restated Trust Agreement of WSFS Capital
Trust I, incorporated herein by reference to the Form 8 A/A filed with the
Securities and Exchange Commission on December 13, 1999.
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. 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 Corporation's 2004 Annual Report to Shareholders
21 Subsidiaries of Registrant.
23 Consent of KPMG LLP
31 Certification pursuant to Rule 13a-14 of the Exchange Act
32 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 10.4.1 represent management contracts or compensatory plan
arrangements.
-28-
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 15, 2005 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 15, 2005 BY: /s/ Marvin N. Schoenhals
-------------------------------------
Marvin N. Schoenhals
Chairman and President
Date: March 15, 2005 BY: /s/ Charles G. Cheleden
-------------------------------------
Charles G. Cheleden
Vice Chairman and Director
Date: BY:
-------------------------------------
John F. Downey
Director
Date: March 15, 2005 BY: /s/ Linda C. Drake
-------------------------------------
Linda C. Drake
Director
Date: March 15, 2005 BY: /s/ David E. Hollowell
-------------------------------------
David E. Hollowell
Director
Date: March 15, 2005 BY: /s/ Joseph R. Julian
-------------------------------------
Joseph R. Julian
Director
-29-
Date: March 15, 2005 BY: /s/ Dennis E. Klima
-------------------------------------
Dennis E. Klima
Director
Date: March 15, 2005 BY: /s/ Calvert A. Morgan, Jr.
-------------------------------------
Calvert A. Morgan, Jr.
Director
Date: March 15, 2005 BY: /s/ Thomas P. Preston
-------------------------------------
Thomas P. Preston
Director
Date: March 15, 2005 BY: /s/ Claibourne D. Smith
-------------------------------------
Claibourne D. Smith
Director
Date: March 15, 2005 BY: /s/ Eugene W. Weaver
-------------------------------------
Eugene W. Weaver
Director
Date: March 15, 2005 BY: /s/ R. Ted Weschler
-------------------------------------
R. Ted Weschler
Director
Date: March 15, 2005 BY: /s/ Dale E. Wolf
-------------------------------------
Dale E. Wolf
Vice Chairman and Director
Date: March 15, 2005 BY: /s/ Stephen A. Fowle
-------------------------------------
Stephen A. Fowle
Executive Vice President and
Chief Financial Officer
Date: March 15, 2005 BY: /s/ Robert F. Mack
-------------------------------------
Robert F. Mack
Senior Vice President and Controller
-30-