The shares of WSFS Financial Corp. fell more than 4% in morning trading, slipping below $ 40 for the first time in a month, after the bank, the largest based in the Philadelphia area, said it suffered millions in losses due to bad debts to an oil refinery and operator of a retirement home.
WSFS, which plans to complete the merger of the Beneficial Bank of Philadelphia with the WSFS Bank of Wilmington to create a network of 90 branches in the region next month, says it had to write down a total of $ 11.6 million in bad loans due to events “occurring within the last 30 days.
After trading as low as $ 39.95, the shares ended the day at $ 40.30, down 3.66% ($ 1.53),
In a file filed with the Securities and Exchange Commission, WSFS did not identify the borrowers. Bad debts included:
a $ 5.7 million loan “related to a refinery that experienced an isolated event that impacted the operations of the facility”.
a loan of $ 5.9 million “to a managed health facility that has recently been placed in receivership by state authorities.”
The total is slightly lower than the $ 13 million in net income reported by WSFS for the first three months of 2019. WSFS acquired Beneficial in March.
WSFS had identified the two loans as “loans that did not perform for an extended period” and said the company had “actively worked on resolution” to get some of its money back, before the recent borrower crises.
Which refinery and which managed care facility?
Philadelphia’s economy suffered a severe blow last month when Philadelphia Energy Solutions (PES), the oil refinery complex in southwest Philadelphia, suffered an explosion and fire. The creditors who own the complex close the refinery and put it up for sale as union leaders and government officials scramble to find a savior. If no buyer is found, the PES informed employees that their jobs would be laid off on August 25 (60 days after the closure was announced).
Bankruptcy filings show both WSFS and Beneficial as creditors of the PSE. It is “reasonable to assume” that the losses at the WSFS refinery are due to the PES fire, wrote analyst Frank Schiraldi in a report to clients of New York investment bank Sandler O’Neill + Partners.
Schiraldi didn’t dare guess which healthcare facility might be involved. There are plenty of possibilities. For example, last year, the state of Pennsylvania took over nine retirement homes operated by Skyline Healthcare LLC and owned by Joseph Schwartz of Brooklyn, among other facilities, and began to seek new operators; Massachusetts put the company’s retirement homes into receivership in April.
Last week, Hahnemann University Hospital and its subsidiaries declared bankruptcy; his creditors went to close the hospital and sell its assets, because what those involved in the sale may expect can be big discounts.
Schiraldi says he expects other banks to report similar credit problems. He lowered his profit estimates for WSFS, but said he expects the company to remain profitable and growing.
Editor-in-chief Andrew Maykuth contributed to this report.