WSFS Financial in Wilmington, Del., said its fourth-quarter results will take a hit tied to an alleged fraud scheme and a decision to surrender its Bank-Owned Life Insurance policies.
The $6.9 billion-asset company said in a press release Thursday that it would record a pretax operating expense of $2.8 million, or 6 cents a share, tied to a series of loans to Zahid Aslam, who faces charges of conspiracy to commit bank fraud and making false statements on loan applications.
WSFS disclosed the alleged fraud in June, shortly after Aslam was charged. A WSFS loan officer was also charged with conspiring with Aslam.
The company said Aslam’s loans became delinquent when he decided to liquidate business assets following his indictment. It said it is working with insurance carriers to recoup losses “and believes it has a strong case for recovery in 2018.”
WSFS also said it will surrender all Bank-Owned Life Insurance policies, which banks typically use to offset the costs of employee benefits. It said returns on the policies are no longer meeting its return on assets goals. Administrative complexity and a reduction in insured interest coverage also contributed to the decision.
The move will result in an incremental income tax charge of about $8 million, or 25 cents a share, in the fourth quarter. Surrendering the policies under new tax rates will create a $3.6 million savings compared to doing so under the prior tax rate, WSFS said.
The company also said it expects to record a $12 million to $13 million impairment on its deferred-tax asset, which translates into a 37 cents to 40 cents a share charge. It also plans to make a $1.5 million charitable contribution to its foundation.
WSFS is expected to report its fourth-quarter and 2017 results on Jan. 22.