Capping a four-year comeback from near death with a non-bank acquisition, WSFS Financial Corp. of Wilmington, Del., is buying a reverse mortgage lender. The $1.2 billion-asset financial services company announced this week it has signed a definitive merger agreement to acquire Providential Corp. through a tender offer valued at about $25 million.
A subsidiary of WSFS, called Wilmington Savings Fund Society Federal Savings Bank, will make the tender offer within the next week of all of Providential's outstanding stock at $4 per share. Bank officials expect the offering to be complete by the first of December.
"The acquisition of Providential fits with one of the company's long-term strategic objectives of building on its extensive knowledge of the reverse mortgage business," said Marvin Schoenhals, chairman and president of WSFS. "We are pleased to be a part of providing an additional source of income to senior citizens through reverse mortgages."
San Francisco-based Providential is a $35 million-asset corporation with about 1,000 reverse mortgage loans in California. After the acquisition of Providential, about 3% of WSFS' assets will be in reverse mortgage loans. WSFS already has about $27 million.in this type of loan.
A reverse mortgage loan provides the borrower with supplemental retirement income through monthly tax-free advances. Repayment of principal and interest is not made until the borrower leaves the house, through death or moving. The debt is satisfied by the sale of the home.
"There's a perception that this product has appeal to a significant portion of senior citizens," Mr. Schoenhals said. "It's not a mainstream product, but we do have expertise in this area and we'd like to build on that."
Mr. Schoenhals acknowledged that acquiring a company on the other side of the country is somewhat unusual, but reverse mortgage loans can be made anywhere, regardless of the location of the lender. WSFS probably will not initiate any new loans of this kind until 1995, when it will look for borrowers in California and elsewhere, he said.
The acquisition represents another step in WSFS' rapid comeback from 1990, when it registered a record $85.5 million loss. Mr. Schoenhals arrived at the end of that year from a Michigan thrift and began moving the institution away from the faulty commercial real estate loans that nearly destroyed the 160-year-old thrift.
WSFS' recently released third-quarter figures show a healthy company, with quarterly earnings of $2.4 million, a 53% increase from the same period last year.
Earnings for the nine months ended Sept. 30 were $5.1 million, compared with $4.2 million for the same period in 1993. This translated into 35 cents per share for the nine-month period, up from 29 cents from last year.
Nonperforming assets have also been greatly reduced from the dark days of the late '80s. As recently as 18 months ago, WSFS carried $87.3 million in non performing assets on its books, representing 8% of total assets.
As of two weeks ago, this number had been reduced to $41 million, or 3.5% of total assets.
WSFS has 12 retail banking offices in New Castle County, Del.
Its other subsidiaries include Fidelity Federal Savings and Loan Association in Philadelphia, which it acquired in 1990, two credit corporations, and Star State Financial Services Inc.
