WSFS Financial Corp earnings showed a pre-tax loss of $586,000 during the first quarter of 2009 for its reverse mortgage subsidiary 1st Reverse Financial Services. The company acquired a majority stake of 1st Reverse in April of 2008 for about $3.4 million.
1st Reverse’s Q1 2009 numbers show an improvement compared to a pre-tax loss of $832,000 for the fourth quarter of 2008. "1st Reverse has modified its business plan to rely more heavily on retail loan originations, and also during the first quarter implemented many cost reductions to improve expected breakeven origination volumes," the statement said.
During the earnings call, Andy Stapp from B. Riley and Company asked Mark Turner, WSFS’s President CEO, “do you still anticipate 1st Reverse to turn a profit in the second quarter?” His response below:
Andy, our primary goal now with 1st Reverse management is to continue to hone the model and cut costs to get them to a breakeven level as soon as possible. At the same time, we are also working with 1st Reverse management on our strategic alternatives for that business, which could include partnering, a sale of part or all of the business, or an orderly wind down if we cannot get sufficient traction.
It’s been a difficult market for a start up involved in mortgages, as home values have come down. I’ll say though we still strongly believe in a reverse mortgage product as a great way for seniors and baby boomers to live comfortably in their homes in retirement. And we believe the product has a bright future because of the demographics, and we continue to have great success originating from our local retail branch network.