WSFS Financial Corporation the parent company of WSFS Bank revised earnings as it moved to sell nonperforming loans, made accounting changes and sold mortgage securities.
An announcement on Thursday stated that the board of directors recently approved the marketing of approximately $52 million in unpaid principal balances of problem and nonperforming loans in bulk sale transactions. The loans were reclassified as loans held for sale in the second quarter of 2012 and will result in at charge to earnings in the second quarter. WSFS anticipates that the closing of a sale will be on or around June 30, 2012. If successful, this transaction will improve asset quality statistics, including the ratio of nonperforming assets.
In recent quarters, WSFS has also sold mortgage backed securities (MBS) as part of its portfolio management, and has recorded gains on sale of these securities. In the second quarter of 2012, the company anticipates selling approximately $300 million in high quality mortgage securities and reinvesting the proceeds in high quality securities of shorter duration, reducing the prepayment and interest-rate risk in the overall portfolio.
Mark A. Turner, President and CEO said, “Leveraging existing investments, increasing our bottom line, improving asset quality, and reducing the risk of rising rates on our securities portfolio are important outcomes for us this year. If the two asset sales are successful, the company anticipates that the transactions combined will be relatively neutral to overall earnings and capital in 2012, will reduce prepayment and interest rate risk in our investment portfolio, and will reduce problem assets, freeing up management to focus on other productive activities.”
Wilmington-based WSFS also announced a decrease in net income of $726,000 for the first quarter of this year as well as charges in the second quarter. It is related to adoption of a new loan risk rating system and and an additional $1.6 million provision for loan losses. As a result, updated net income for the first quarter of 2012 is $6.4 million as compared to $7.2 million.
On March 1, 2012, the company adopted a new loan risk-rating system for its commercial loans incorporating recommendations from industry experts. Following this implementation, the WSFS undertook an extensive internal review, validated by outside consultants, covering loans in its last pass grade and its problem loan grades.
