WSFS Financial Corp. Shuts Down Joint Venture

WSFS Financial Corp., Wilmington, Del., has given up on its joint venture in the reverse mortgage field after a little over one year, citing the unlikelihood of profitability. In April 2008, the company acquired a majority interest in 1st Reverse Financial Services LLC, Westmont, Ill. While results at the unit did improve during the second quarter when compared with the first quarter this year, it was still a money-losing operation. For the most recent period 1st Reverse had a pretax loss of $152,000, while in the first quarter it lost $586,000. Another positive sign was a $98,000 increase in fee income during the period to $654,000. However, according to WSFS president and chief executive Mark Turner, 1st Reverse has not reached breakeven levels "and in the current economic climate, prospects for achieving required returns are weak. As a result, WSFS has made the decision to conduct an orderly wind-down of this start-up initiative." WSFS will take a pretax charge of $1.6 million related to the closure. Mr. Turner added that WSFS will still do reverse mortgages in its Delaware retail banking branches, pointing out it is the top reverse originator in that state. For the quarter, WSFS lost $2.3 million, which besides the 1st Reverse charge, includes a $12 million increase in its loan loss provision and a $1.3 writedown of assets acquired through foreclosure. It also had a $622,000 positive mark-to-market adjustment on a reverse mortgage securitization. A request for comment from 1st Reverse's management had received no response at press time.