WSFS Anniversary Book "From Crisis to Triumph"

T   riumph

From Crisis to

The Rebirth of WSFS

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From Crisis to Triumph | The Rebirth of WSFS

Thank you to Marvin N. “Skip” Schoenhals for your 25 years of service as Chairman of the Board of Directors of WSFS Corporation and WSFS Bank.

Please enjoy this commemorative look at some of the most important moments in WSFS’ history – a history that would have likely ended in the early 1990s without your leadership, the support of C.G. Cheleden and the WSFS Board of Directors and the commitment of our Associates.

We Stand For Service

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From Crisis to Triumph

Part I: 1985-1990 The Crisis Years

From Crisis to Triumph | The Rebirth of WSFS

Introduction

“The Keys, Please.”

The federal bank regulators filed into the boardroom. One, two, three… more than a dozen. There were more regulators in the room than WSFS board members. That wasn’t a good sign. Nor was the fact that both the regional director of the FDIC and the regional director of the OTS were in attendance—a rare occurrence, and one that suggested this meeting was more than just a routine presentation of the results of a recent examination of the bank’s financial health.

“ Something clicked in me.

I said, ‘I’m not going down without a fight.’”

– Marvin N. “Skip” Schoenhals

As the regulators presented their findings, the purpose of the meeting soon became all too clear to the WSFS executives and board members assembled in the room. “It’s over; they’re going to ask for the keys,” thought WSFS’s then-CEO Marvin “Skip” Schoenhals. Skip’s fear proved to be well-founded: The regulators were asking for permission to “shop the bank” in anticipation of its financial failure.

Not ready to go down without a fight, Skip responded with an impassioned plea for a second chance, backed by a solid plan to shore up the future of WSFS. That speech changed the fate of the bank and the face of the regional banking powerhouse for good. In the years and decades to come, WSFS would prove that it was far from “over,” as it righted its financial woes, continued to grow steadily and stayed true to its mission of serving the community.

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In Their Words Over the course of the board meeting on that momentous day in late June day of 1991, FDIC and OTS regulators one by one delivered the results of their examination of WSFS’s financial health. Tension in the room increased as regulator after regulator painted a picture of a bank with no hope for survival.

Record losses and ill-timed investments had drained the bank of its capital reserves and the risk of failure was too great, they argued. The bank had about $1.5 billion in assets, but only $5 million of capital left. Newly appointed CEO Marvin “Skip” Schoenhals and his team were working to understand and address the issues contributing to WSFS’s decline—but the feds made it clear they were running out of time. The regulators’ recommendation: Shutter the bank and sell whatever was left of the 130-year-old thrift.

“ Give us the keys right now.

We’re here to take over.’

It came out of the blue.

They were ready that day to take over the bank.”

– C.G. Cheleden

Here’s what some of the key players in that meeting recalled about the event during interviews conducted in late 2016 and 2017.

MARVIN N. “SKIP” SCHOENHALS, WSFS President & CEO, 1990-2009; Chairman, 1992-2017: This meeting was, I can say it this way, the most emotional business meeting that I’ve ever sat in in my life. I’d gone into this meeting naively thinking, “All right, we’re okay. They’re just here to give us the results of the exam.” The meeting starts, and I don’t know if every regulator spoke, but pretty much almost every one of them spoke and they represented different parts of the exam. In essence, each one of them said in their own words, “We’ve examined the bank; things are really bad. We don’t see how you are going to make it.” All of this concluded with each 200 of those regional directors essentially saying, “Nice try, but you ain’t going to make it.”

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S & L Failures 1980–1988 $120,000,000 $100,000,000 $ 80,000,000

TOM PRESTON, WSFS Board Member, 19902012: I remember that there was cordial small talk, but not a hell of a lot, and then basically the feds said, “Okay, please give us the keys.”

C.G. CHELEDEN, WSFS Board Chairman at the time: They said basically, “Give us the keys right now.

We’re here to take over.” Yeah, it came out of the blue.

They were ready that day to take over the bank.

100

$ 40,000,000 50 $ 20,000,000 0

Bank Failures

Total Assets (thousands)

$

It’s no wonder that FDIC and OTS regulators were skeptical of WSFS’s prospects. During the Savings and Loan crises of the late 1980s, the number of bank failures skyrocketed, putting at risk billions of dollars of depositors’ assets. Source: Savings and Loan Crisis and Its Relationship to Banking, FDIC

Having wasted no time in making their case, the regulators delivered their ultimate request: “We would like each of the directors to sign this paper that gives us permission to shop the bank.” Simply stated, the feds wanted approval to prepare to help WSFS sell its assets to one or more financial institutions before what they saw was the likely collapse of the bank.

From Crisis to Triumph | The Rebirth of WSFS

$ 60,000,000

SKIP: Eventually we got to the assistant FDIC director who held up a piece of paper and said they wanted to go out and find somebody to acquire us and do what’s called an assisted transaction.

What that would have looked like is they would have immediately had the legal right without right of challenge to go shop the bank, which means they would have quickly put together a package that they would have taken to our competitors and said, “WSFS is going to be closed. It needs to be an assisted transaction. What will you pay the FDIC as receiver to take over the bank and how much assistance will you need from the FDIC to continue whole?”

NICK KETCHA, Regional FDIC Director in 1991: What we did with a lot of places is say, “If you don’t raise your capital, we’d like permission to put you on the market. We applaud you for what you’re trying to do, but also we want to be prepared in case you’re not successful, so that we can bring this to a soft landing, rather than an abrupt crash.”

With that we started to put together an information package for WSFS, that if they weren’t successful in their efforts, we would be ready to then call for a bidders’ meeting and work with the chartering authorities on a closing date where hopefully some other existing institution would be able to take it over.

SKIP: We would have ceased to exist. It’s over. So I’m sitting in this meeting. I’ve relocated my family. I’m hearing, “It’s all over.”

I’m sitting there as each guy speaks, frankly getting more and more A sight that would make any bank leader quake: FDIC liquidators prepare depressed. I’m not going to be given a chance. They’re telling me to enter a bank in this FDIC file photo from the 1950s. Source: FDIC they’re going to take over, close the bank, sell it, and I’d be out of a job. I don’t know if panic would be the right choice of words, but nevertheless, “Oh my gosh.”

Mind racing, Skip knew it wasn’t time to give up. He delivered an impromptu speech to sway the regulators to give WSFS more time to strengthen its position.

SKIP: Something clicked in me. I said, “I’m not going down without a fight.”

When they got done—it took about 45 minutes for them to do all that—I gave a 25-minute, 35-minute, I don’t know, but it was an impromptu speech.

I didn’t go in there with a speech prepared as to why they were wrong and what we were doing to resolve this situation, the plans we had underway, etc.

C.G.: And we got out the [investor presentation] books and handed them around. I said, “Here we are. We’re on the verge of raising capital. What are you doing?”

SKIP: When I got done with that, the two regional directors looked at each other and said, “Let’s adjourn for a few minutes. Let’s go and talk about it.”

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We all left the boardroom. A few minutes later, I came walking back down the hall. The two regional directors were literally standing in the hallway outside the boardroom. I walked up to them and one of them said, “Skip, we’re not quite sure what to do. You made a compelling case.” I said to them, “Why don’t you let me come to Washington to make my case?”

I don’t know where that idea came from but it popped out of my mouth. In essence, what I was saying is, “Let me come and make a presentation to your two bosses.” I didn’t put it that way, but that in effect is what I was asking.

They said, “Okay.”

That gave us a lease on life in that they agreed to let us come to Washington; at least they weren’t going to shut us down during that period of time.

C.G.: He [Skip] pushed that tidal wave out the door slowly, probably 45 minutes. I think besides his eloquence, there were those books. It gave them something tangible that said, “We are doing this now. I’m going to go to people tomorrow to raise capital. Give us a chance.”

TOM: I remember that Skip and CG made a really passionate argument for a little more time because what the government was going to do, if I remember correctly, was going to cost the American taxpayers a hundred million dollars, and these two guys were convinced that the bank could be saved for far, far less than a hundred million dollars, and so it was just crazy to let the FDIC take it over.

So you know after that—and I don’t think the government made the decision at that meeting—based on the impassioned arguments, they were set back a bit and agreed to give it further consideration, then of course ultimately said, “Okay, you’ve got a really short leash here, but at least you’ve got a leash.”

JOE JULIAN, WSFS Board Member, 1983-2011: Skip and CG went down to see John Downey, head of OTS. We weren’t the only bank in trouble. He [Downey] was the grim reaper.

Skip went down to present to Downey. Downey wouldn’t ask for the keys right away. Gave us 60 to 90 days to develop a plan that would make sense. With board support, got some people to invest in the bank, tided us over for a time.

OTS backed off and we were able to get going.

SKIP: Several things happened in the next three months culminating with, in September, our capital plan was formally approved. That was the end of the first chapter, the first really broad chapter in terms of coming back from the ashes. With that formal approval, we had a legal agreement with our regulators that as long as we stayed on path of the capital plan, we had a legal right to continue to operate. Very significant day when we got that.

From Crisis to Triumph | The Rebirth of WSFS

“ That gave us a lease on life in that they agreed to let us come to Washington; at least they weren’t going to shut us down during that period of time.”

– Marvin N. “Skip” Schoenhals

NICK: We were somewhat skeptical but we said all right, you got a new team there. Show us what you can actually do; we want some benchmarks. And you know, little by little they kept pulling, I don’t want to say a rabbit out of a hat, but they would get this loan closed or they’d get this sold off. They started building toward what they’d said they’d do in the capital plan.

The passion and persistence of the WSFS team paid off. Over the course of the next few years, the bank achieved the goals set out in its capital plan and reached a solid financial footing—a feat that very few banks accomplished at that time in banking history.

ANGELO VIGNA, OTS Regional Director in 1991: Well, to be honest…once banks got to a certain level in terms of the negative positions, very few of them came out of it. WSFS is one of the few that was really able to get the institution back into a position where they could be capitalized. This is a very rare instance where an institution can be capitalized without financial or government assistance.

The success they’ve had, it’s almost dynamic. Truly unbelievable. It’s such a solid institution today. It’s unbelievable with where they were in 1980, 1990.

Following that day when Skip Schoenhals made his impassioned plea for a second chance, WSFS succeeded in its turnaround and has overcome challenge after challenge, continuing to build on its 185-year track record of success.

Since its near-extinction in 1991, WSFS has been one of the most consistent performers not only in Delaware but among all financial institutions in the U.S.

10/21/1992

12/31/2016

Compound Annual Growth Rate (CAGR)

Share Price

$0.42

$46.35

21.69%

Market Capitalization

$6,189,000

$1,423,540,000

25.43%

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From Crisis to Triumph | The Rebirth of WSFS

Chapter 1

Riches to Rags: Star States Goes Public

It was the late 1980s, and the U.S. Savings & Loan crisis was in full swing.

“ 1989 was a challenging year in positioning the company to move ahead.”

– Walt St. Clair

But for WSFS—and its new parent company, Star States—attempts at growth and expansion were the order of the day. In 1986, WSFS went public, converting from depositor to shareholder ownership. The subsequent flurry of investment and acquisition activity, manifested in physical form by plans for an impressive (and expensive) new headquarters building, was the bank’s MO during the second half of the decade.

Even as it strove to outgrow both its traditional thrift model and the boundaries of the Delaware state line, WSFS encountered significant commercial loan quality issues that put the brakes on its plans for expansion.

With its stability uncertain and a gaping hole in the ground in Wilmington’s Rodney Square to prove it, WSFS ended the MTV decade down, but not out.

In Their Words Looking to raise capital and become a more efficient, profitable and wellmanaged bank, WSFS went public in 1986 in what the Wilmington News Journal later called “an ill-fated expansion move.” At the time of its initial public offering of 3.94 million shares, WSFS had spent four out of the past five years operating in the red, having suffered severe losses just like most thrifts in the United States at that time thanks to record-high interest rates. With the capital it raised through its IPO, WSFS hoped to at least double its net worth and fuel growth and diversification that would reverse its losing streak.

Once WSFS became a public company operating under Star States, management turned its attention to growth. The bank went on a buying spree, acquiring such subsidiaries as Fidelity Federal in Philadelphia (a hard-fought acquisition) and B. Gary Scott Realty, among others. The goal: diversify, break into the commercial loan business and reduce the sensitivity to interest rates that had plagued WSFS throughout the decade. New product lines, like the aptly named stretch mortgage, also were part of the bank’s diversification play.

And then, there was the hole in the ground. Preconstruction demolition had begun for a new $70 million, 21-story headquarters building in Wilmington’s Rodney Square, a structure The News Journal dubbed a “monument to WSFS.” Construction wasn’t moving forward on WSFS Tower, however, as the bank increasingly redirected capital to cover nonperforming commercial real estate loans. Amid an environment of rampant bad loans, weakness in the real estate market and forecasts of a possible recession in 1990, observers were skeptical about WSFS’s investment in a high-end HQ. 13

“How can a bank that’s just reported a $9 million loss afford it?” read an unattributed quote in The News Journal. “It’s a high risk,” said a competitor.

“It could bury them.”

NICK KETCHA: The one thing I remembered about WSFS was the big hole in the ground next to the building…and I remember thinking something along the lines of, “Well, they’ve dug the hole and they’ve got one foot firmly planted in it.” We were making assessments of management because a lot of banks— particularly their thrifts—had gotten themselves in holes.

After consecutive annual losses of $2.16 million, $6.85 million and $17.5 million, WSFS took a $10.3 million hit against earnings to boost its loan loss reserve to cover major commercial mortgage foreclosures. During 1989, non-performing loans increased by 180 percent and by the end of the 1980s, these loan performance challenges had effectively ushered WSFS out of its era of intense acquisition and diversification.

“1989 was a challenging year in positioning the company to move ahead,” the bank’s chairman and chief executive officer at the time, J. Walton St. Clair Jr., told The News Journal in January 1990. “The steps which were taken during 1989—particularly during the third quarter—to bolster our reserves for asset losses were necessary to bring us into line with recent experience in real estate lending. We will continue to deal aggressively with problem assets.”

T.K. KERSTETTER, WSFS President and COO, 1982-1990: In the highinterest-rate time periods and as banks started to mature, WSFS found itself in a challenge. It was a savings bank, and savings banks were built on giving mortgages. They would offer savings accounts at three, lend a mortgage out at six, and there used to be a three-six-three rule. Pay 3% on savings, 6% mortgages, and be out of the bank on the golf course by three.

Those were the old days. WSFS got itself in trouble and the board did a search. I actually was in Allentown, Pennsylvania, and Walt St. Clair had just come in as the president of that bank and was there a couple years. He got into a proxy battle with the largest shareholder, and the largest shareholder won, and Walt St. Clair was terminated up in Allentown. He was recruited then

by WSFS to turn the bank around and institute products and services that WSFS needed to be successful, like commercial lending, retail lending. In other words, they wanted to change the bank to where it could be a more successful contributor to the community. The one thing that WSFS had that was very revolutionary was something called the Plan Card, and the Plan Card, at the time, was maybe the first debit card in the country, and we’re going back a ways. You could use it at stores in the area, and it would give you money back on your purchases. Just what’s being done today by credit cards. It worked exactly like a credit card. They sold the companies on having machines in to verify the cards just like credit cards. It truly was a revolutionary product that set the stage for its growth, because a lot of Delawareans carried the Plan Card.

From Crisis to Triumph | The Rebirth of WSFS

One of the most interesting things about WSFS, which was very attractive to Walt St. Clair, was that it was a federally chartered savings bank, which meant that it had a charter that would let it do things that traditional banks couldn’t do. For example, it could own a real estate company. It could own a leasing company. It could own a real estate development company. It could do things

“ The goal was to make this mutual savings bank operate like a commercial bank, and then have the opportunity to take it public.”

– T.K. Kerstetter

that traditional bank charters and regular bank charters couldn’t do. St. Clair, at the time, thought this was a coup.

Walt pulled in people, all commercial bankers from all different areas of expertise, to create a management team. The goal was to make this mutual savings bank operate like a commercial bank, and then have the opportunity to take it public. Off we set on building on a complete commercial loan area, got in heavily to lending, retail lending, cars, equity loans. We even got into reverse mortgages at the time and grew the bank. I can’t exactly remember the year, but the bank had its best earnings performance in its 125-year history.

The problem was, right after that, in the late ’80s, the first savings and loan crisis. So we never got the benefit of the stock price growth because the whole industry was down.

Here’s where the flexibility of the charter comes into play: During the course of those years, from ’82 to ’88, we had started a leasing company, we had started a real estate development company, and we had acquired B. Gary Scott, which was one of the leading real estate companies in Wilmington or in Delaware.

In retrospect, I wish I had been stronger at the time about the real estate development…St. Clair made mistakes, but there wasn’t anybody that was more ethical or cared more about that bank than he did. It’s just a case of some poor judgment in trying to grow things almost too fast. I can tell you he was a banker his whole life, and it was certainly the saddest day of his life when he wasn’t successful in the end of this, but that happens.

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JERRY HOLBROOK: In ’86, the bank went public. That was the beginning of the changes and the growth, sort of. “We’ve got to grow the company.

We’ve got to get earnings up.” We had a fair number of consultants, investment bankers and the like presenting to management and the board, or at least management, about different kinds of strategies, how to deploy the capital and the like. The bank hired a bunch of people in commercial lending, maybe too rapidly. The bank went into mortgage banking.

Around that same time, Walt St. Clair was the CEO. Tom Kerstetter was the president, or at least he was probably the EVP, the chief operating officer– type person. Those guys had a lot of ideas, a lot of new kinds of things they wanted to change culturally. The bank, as a nonpublic entity, had always sort of underperformed its peers, and they wanted to change that. They had a plan and, as it got executed, maybe it wasn’t executed all that well. The market changed. I think the S&L crisis that hit was really a real estate crisis. Delaware and southeastern Pennsylvania, where most of the loans had been done in the commercial real estate world, were obviously dramatically impacted.

I think what we came to find, through the asset quality review by PricewaterhouseCoopers and the regulators, is that the controls the bank had in place relative to how these loans were approved and the types of detailed analysis and underwriting that was done on them were probably lacking. We expanded into the teeth of a real estate crisis before we realized what had happened. That was really the crux.

I would say a million other things that Walt St. Clair took on at the same time, that was always sort of tough to figure out what he was trying to accomplish. I wasn’t in all the senior management meetings at that time, until about ’89/’90, but we were heading down lots of different paths, trying lots of different things, and probably bit off way more than the bank had the capacity to do, like building a new office building in downtown Wilmington.

CHIP CLIFTON, Client Operations Manager, WSFS Cash Connect: When we got into the late ’80s, things were pretty bad and we were getting a lot of bad press and at one point, when I was in Branch Operations, we thought that there might be a run on the bank. I can remember sitting in Walt St. Clair’s office talking to Brooks Armored Car. We’d made arrangements to have I think it was $30 million in cash on hand sitting in a Brooks truck at an undisclosed location, and my job was to

From Crisis to Triumph | The Rebirth of WSFS

“ You assumed the bank was doing very well because it was getting into all these ventures. The next thing you know, it was like things fell downhill. It was like we went from riches to rags.”

– Lisa Brubaker

look at branch totals like every five or ten minutes and if I saw anything drop, I’d have to direct the car to whatever office appeared to be losing money.

So that was pretty scary.

Yeah. Well, we had made arrangements with the Fed to have this money. It was sitting in a truck. The money was in tubs, which are these huge containers that they bring bulk currency in, and once that’s opened, it’s yours and—this was before we had laptops and before we had even a PC with a hard drive in it—we had no idea how we were going to verify it and make sure that it was all there. Everything was kind of written down, jotted down on paper, so we were keeping our fingers crossed all day long if we were going to get through it without having to break the seals on anything. So that was probably one of the most nerve-racking things.

LISA BRUBAKER, WSFS Director of Retail Strategy, who had just started her career working at a WSFS bank branch in the late 1980s: I was in an entry-level position at the time.

What I remember is that when I first started, the bank was very robust and growing very quickly. We were involved in a lot of things. You assumed the bank was doing very well because it was getting into all these ventures. The next thing you know, it was like things fell downhill. It was like we went from riches to rags.

The fast change from good times to bad left shareholders demanding change as the Wilmington Saving Fund Society entered the 1990s.

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From Crisis to Triumph | The Rebirth of WSFS

“ They took on loans that no one else would take.

They were in way over their heads and nobody raised their hands to slow them down or say, ‘What are we doing here?’”

– C.G. Cheleden

The First Domino: Financial Position Declines and C.G. Takes Over the Board The year 1990 came hot on the heels of a period of intense expansion and diversification for WSFS—an era that left some questioning whether the newly public thrift was “too big for its britches.” At the outset of that year, the outlook for the future of the bank was rocky at best. The bank was ripe for the activist shareholder shakeup and management changeover that were to follow just a few months into that new year.

Enter C.G. Cheleden, a “dissident shareholder” who joined the WSFS board in April 1990 through a successful proxy bid, supported by Philadelphia financier Bill Dimeling and his Guaranty Bank Shares, to garner seats on the board for himself and Tom Preston. C.G. sought to begin righting the WSFS ship, a task that would begin in earnest with the exit of the thrift’s CEO and President. C.G. soon found himself as the new board chairman, with the responsibility of hiring a new leader.

In Their Words

The tone in the room during the January 23, 1990, WSFS board meeting must have been very somber indeed as the OTS regulator, a Mr. Roach, delivered the results of a recent examination. By his count, WSFS faced a laundry list of growing financial concerns that were impressive both in number and severity.

JANUARY 23, 1990 BOARD MINUTES: Mr. Roach…stated his report indicated that classified assets are too high, there has been a gradual erosion of capital, our service corporations are reporting negative earnings, the ratio of overdue loans to gross loans is 5.27%, there appear to be credit quality problems…they believe our allowance for loan loss reserves is “minimally adequate,” there are heavy concentrations in our loan portfolio, all of which will not be helped by the downturn in the local real estate conditions.

The final verdict from the examiners: an OTS composite rating of 3, which would require WSFS to enter into a supervisory agreement with the OTS. Under the agreement, OTS would require and monitor bank policy changes intended to improve WSFS’s financial health, while keeping a close eye on its business dealings. Not the best sign for a bank that had spent the past several years investing heavily in growth—and in a yet-to-be-constructed $70 million, 21-story headquarters tower.

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As the year progressed and the local real estate market continued to decline, the picture did not become any brighter for WSFS. Increasingly plagued by deterioration in its commercial loan portfolio, WSFS declared a staggering $85.5 million loss for the full year 1990.

C.G. CHELEDEN: They took on loans that no one else would take. They were in way over their heads and nobody raised their hands to slow them down or say, “What are we doing here?”

JERRY HOLBROOK: I mean, the bank had had some credit quality issues in ’88/’89 kind of time frame, and then sort of the wheels came off in 1990...

That was also right around the time the first Basel Accord was passed, I think, in ’89 or ’88, and you had to be in compliance by the end of 1990, I think, for risk-based capital guidelines. Right around the time Skip was coming in, the capital requirements went from what used to be sort of loose stuff for banks to purely you had leverage capital, what they called core capital at the time; you had tangible equity, and then you had what everybody called the former risk-based capital, what kind of risk you were taking.

The things and the strategy that were deployed by [then-CEO] Walt St. Clair and the management team at that time clearly didn’t line up with the risk-based strategy of capital, so we’d taken capital and leveraged it into the highest risk-weighted assets, commercial loans. Ultimately, the losses that ate through all of that were phenomenal.

LISA BRUBAKER: I remember there were a lot of conversations and just a lot of questions from customers about what was going on and how could this be happening, and some questions at the time too about, “Did the bank get too big for its britches? Well, you shouldn’t have gotten into all these other businesses that weren’t related to banking.”

T.K. KERSTETTER: The biggest problem…was the real estate development company. Real estate development, both from the perspective of builders and of financiers, is a risky business. High risk, high reward. If you are successful in a shopping center development or a housing project, you can do very well. At the same time, from the bank’s perspective, it was a business where you did not necessarily get personal guarantees. In other words, you were sharing the risk and the reward with whomever the builder or developer was.

At one point in time, over the course of those six years, we recognized the risk. This is senior

From Crisis to Triumph | The Rebirth of WSFS

“ The bank had had some credit quality issues in ’88/’89 kind of time frame, and then sort of the wheels came off in 1990.”

– Jerry Holbrook

management as a group. Thought that risk was more than a bank should have and sort of eased out of the business. Unfortunately, there were several board members that were active in this space and encouraged St. Clair to get back into it even though the rest of senior management was not excited about the prospect. We thought we had learned our lesson. Needless to say, we ended up jumping back in that business. When the thrift crisis came and rates shot up significantly in the late ’80s, you have to have the capital. You have to meet certain capital requirements. The bank was functioning very well as the bank, but some of its subsidiaries, particularly the real estate development subsidiary, were taking it on the chin.

While the bank had plenty of capital for the bank, the capital was being sucked out because of our requirements in the real estate development company to reserve for those losses. It put pressure on the bank’s earnings. That was an opportunity for Cheleden, at the time, to say, basically, that this bank is not making good decisions and to speak up to management that it might need some help. Interestingly enough, at that same time, the regulators were concerned at how quickly the capital was going through the real estate development company.

Even though they had some comfort with the bank part, it’s all tied together in the holding company.

The holding company, at this point, was named Star States, and WSFS was a subsidiary of the holding company, but literally the bank was the holding company. It was a one-bank holding company. The regulators were concerned because we were getting close to our capital requirements, so they were becoming a little more forceful with the board. This was something the board wasn’t familiar with, and now it was a public company, so it had to report on a quarterly basis and do all the things that public companies had to do. The capital got close enough that they were recommending some changes in how the bank operated or, more importantly, what it could do with the real estate development company.

The sad part about all this was the bank was still a well-functioning piece of the business, and if senior management had had its way, we wouldn’t have been in the real estate development business when this happened. Between the board and St. Clair, that’s what we ended up continuing to do. There was also the attempt to build a new office building, and that was through the real estate development company. That, too, was something that everybody was nervous about and turned out to, obviously, not be successful.

As financial performance was declining over the course of 1989 and 1990, regulators weren’t the only ones taking notice. Customers were getting nervous, as were investors. The 130-year-old thrift was primed for change, especially in the mind of a certain shareholder with money in his pockets and time on his hands: C.G. Cheleden, who would play a pivotal role in the bank’s next chapter.

The year was 1989, and 5% WSFS shareholder C.G. Cheleden had just completed the sale of Liberty Property Management Group, LLC, and was

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looking for the next big thing. His hope, based on the age of CEO Walt St. Clair and the fact that WSFS was now public—was that WSFS would be sold, resulting in a “significant price appreciation” of the stock. But when his WSFS investment instead began to decline in value, C.G. saw an opportunity to become personally nvolved in improving WSFS’s financial position.

C.G. CHELEDEN: I grew up in a thrift, a mutual thrift, and I was made CEO and took it public. I had 20-plus years of thrift, not commercial banking. I made an investment in WSFS, biggest investment I’ve made in anything at that point.

In ’89—sometime in early ’89—I was accumulating the stock. I thought Walt St. Clair would be the kind of a guy that would want to sell. So I just thought it was a good speculation, and then the stock went from 16 to 7 and somewhere in there I said, “Gee, maybe I could be of help.” Okay.

So I went to see him and I had met him before because he called on me, tried to buy us [Liberty] after we went public.

I looked up who else had big shares and there was a guy I knew from Philadelphia who had 5%. I went to see Walt St. Clair and he said, “No, we’re fine. We don’t need you. Thank you.” I decided to write a proxy that I had the 5% shareholder on my side and I was out of work. It took me three months to do the research and I had 14 points why they were going wrong, including the big hole in the ground.

I go up to New York by myself. The bank’s attorneys put me in this conference area of 100 people…and kept me waiting for 20-plus minutes.

Then this big guy comes in with his suspenders and says, “Son, last somebody tried to do this it cost them a million dollars and they lost.” Basically he was saying, “You’re in way over your head.”

And I was.

I was on a mission. I wanted to get on this board. So a confluence of circumstances: The stock went down, I had a 5% share hold, I wrote the proxy, I filed it with the SEC. Next day I get a call. “Let’s talk.” You see, they thought I was bluffing. I wanted four seats on the board. Okay, so they offered me one. I turned it down. I said, “Two, as long as we agree on the second one,” which was Preston. He was a local guy, good reputation, wasn’t a raider or corporate crazy man. So with a standstill agreement, we agreed.

TOM PRESTON: I was a trial lawyer with Duane, Morris, Heckscher here in Wilmington in 1990 when a friend of mine that I’d gotten to know when I lived in Philadelphia, Bill Dimeling, contacted me and said that he and his company, which was Guaranty Bank Shares, wanted to launch a proxy fight against WSFS…

From Crisis to Triumph | The Rebirth of WSFS

C.G. Cheleden

The First Domino: C.G. Cheleden C.G. Cheleden was no stranger to banking when he joined WSFS’ board and advocated for change in the bank’s management. Although he was a successful attorney, he literally grew up in banking. His father, Charles S. Cheleden and his mother, Anne, ran Liberty Federal Savings Bank on Broad Street in Philadelphia for nearly 70 years.

C.G. worked at Liberty for 20 years and succeeded his father as CEO. In 1987, C.G. took the bank public and then sold it to Equimark.

“People quadrupled their money, and I was out of a job,” C.G. recalled.

It was during this time that C.G. met Walt St. Clair, who was CEO of WSFS at the time. “He had interest in buying us right after we went public. I said, ‘Gee, we’ve only been public a little while. Let us get our feet wet.’”

Guaranty Bank Shares was a holding company that literally bought pieces of small banks, mostly around Pennsylvania…and had bought, my recollection is, 5,000 shares when WSFS went public a couple years earlier.

I also believe that Bill Dimeling and Guaranty had partnered with C.G. before I even was brought into the picture, and C.G. held shares separately from Guaranty, so when we launched this proxy fight, it was with those combined resources.

My recollection is that WSFS went out and hired attorneys which bought them a single meeting with the board and then immediate settlement with us. The settlement was, “Okay, we’ll let C.G. on the board, and Guaranty, you can appoint somebody to the board.” Bill Dimeling came to me and said, “Listen, you live in Wilmington. You’d be interested, I think. Would you be able to do this?”

I went to the management of my firm and they said, “Sure.” By that I got put on the board at the same time that C.G. did, although I concede that I didn’t know anything about banking, C.G. totally the opposite. I remember going to that first board meeting, which I think was in late winter or very early spring, and the hostility was palpable.

You know C.G. established his credentials as a banker in a tremendous hurry. My recollection is by the end of that very first meeting, nobody April 1990 (Wilmington) News Journal article foreshadowing a contentious April 1990 stockholders meeting. had any doubt that of all the people in that room, nobody knew more about banking than C.G. did, and most of us knew far, far less, especially the “independent” board members.

Having settled with Cheleden and Preston, the firm trained its focus on improving its financial position. It sold its fleet leasing subsidiary. It increased its loan loss reserve. It suspended cash dividends in order to preserve capital. It reduced its workforce by the dozens.

It also scaled back its equity position in the new HQ building downtown.

The board had been exploring other options to reduce WSFS’s liability in the tower project—teaming with other equity partners, selling the project and becoming a tenant and searching for a second major tenant to help shoulder the construction costs. The result of these efforts as of the May 1990 board meeting speak volumes about WSFS’s worsening financial straits: MAY 3, 1990 BOARD MINUTES: Because of the state of the thrift industry in general, WSFS’s financial condition in particular, banks not willing to make

23

real estate loans and the softness of the Wilmington real estate market, we have been receiving negative responses. Mr. Sweet said he had interested parties for $12 million of the equity, but after the negative press of last week he is not sure the parties will still be interested.

At that same meeting, the board decided it had no choice but to delay construction on the building, leaving a gaping hole in the ground on Rodney Square. Pressure was mounting on all sides: pressure to solve the tower problem, scrutiny from regulators, negative press, demands from investors and another surge of activist stakeholder unrest. Something had to give. In the mind of C.G. Cheleden (who the others later called “the first domino” for setting the next series of events in motion), the smart money was on a change in leadership.

T.K. KERSTETTER: So they [Cheleden and Preston] joined the board, and I can remember multiple board meetings that their first course of action was the recommendation that the CEO be terminated. It was very distracting to a board, where somebody starts a meeting like that. St. Clair’s position was to ignore them as much as possible…

The senior management was split on whether it was a good thing or not. It’s always important to communicate, but St. Clair, to this point, had not done that.

It was clear that, at this point in time, that Cheleden and Preston were having a significant influence on the board. Cheleden was a former bank CEO. He was very knowledgeable. Preston was a financial institution attorney. They were pretty savvy in knowing the rules and what’s happened, so it was a lot of pressure, at the time, put on the board.

C.G. CHELEDEN: I went on the board in April of ’90. I don’t know if there was a board meeting that day or I went the next month or whatever. They were way off the budget. They redid the budget. Two months later they’re way off the budget again. Regulators were saying don’t build that building…and that’s where the stock probably went down to seven.

In August, I wrote to all of the board members the day before the meeting, Federal Express to their house, and said, “It’s time for a change.” The night before that board meeting, I get a call from Tom Kerstetter, he was the COO. He said, “Tomorrow, before the meeting,” he said, “we’d like to convene, and you and Tom [Preston] stay in the anteroom for a little while. We want to talk this over.” I’d love to hear his version of it, but…

T.K. KERSTETTER: When I got wind that the board had met privately without inviting us—and if there is a kiss of death in business, it’s the board meeting without inviting all of us inside members. It felt pressure from the

From Crisis to Triumph | The Rebirth of WSFS

“ They were way off the budget.

They redid the budget. Two months later they’re way off the budget again. Regulators were saying don’t build that building…and that’s where the stock probably went down to seven.”

– C.G. Cheleden

regulators. It felt pressure from Cheleden and his crew…So before the board had ever said anything, I went to St. Clair and told him. He wasn’t aware that the board had met, and both of us had employment agreements. I said that he should be prepared for a pretty tough meeting.

“ I turned to my wife at the time and said, ‘Wow, I just created a giant firestorm.”

– T.K. Kerstetter

When I called St. Clair and told him that all this stuff was moving down the tracks with this meeting, I said, “You need to call the dissidents, Cheleden and Preston, and have a conversation about this.” He said, “Nope.” Wouldn’t do it. So I said, “Well, you know, there can be a case here for being terminated with cause, or at least the attempt to exercise that. I’m not sure that’s really what you want to do here.”

So he said, “I’m not calling them,” and I said, “Okay. I will.” I ended up calling Cheleden and Preston and saying, “Listen, the biggest concern here now,” and I put Walt into this as well, I said, “The biggest concern now is for the welfare of the bank. That’s the responsibility, and if it means that there’s a change of management, then let there be a change of management; but it’s clear to me that that’s what the regulators [want] and what needs to happen now so that everything can move forward positively.” So they said, “Why are you calling us?”

And I said, “Several meetings you have asked for the resignation of the CEO.” The topic was never discussed; so I said, “I’m willing to discuss the topic, but I’m going to have to ask you guys to leave the room so that we can have an intelligent conversation with the board on what’s best for the bank.” They, at the time, said, “No, we aren’t leaving,” and hung up the phone.

Well, I want to tell you what it was like as a 38-year-old punk who had the corporate intrigue of calling them, having this conversation, and having them say that they weren’t going to leave the room, knowing full well that they were going to go in the next morning and say that the president called and had offered this up. I turned to my wife at the time and said, “Wow, I just created a giant firestorm.” So I’m sitting there for approximately three hours figuring out how I’m going to call Walt St. Clair to tell him what just happened. The longest three hours of my life, at which point I get a phone call from Cheleden and Preston that says, “Let me get this straight. So you’re saying that if we leave the room, you’re going to bring the topic up?” And I said, “That’s correct.”

They said, “Why are you doing this? Are you making a power play here to be the CEO?” I said, “No. I am so closely tied to St. Clair—as much as I would like to stay at the bank, and I know that the bank part of it is solid—I’m so closely tied, I’m not sure that the regulators or you guys would think that that’s a favorable, that there’s been a clean sweep.”

I said, “The second thing is, [St. Clair] is a person who has the utmost integrity and taught me more about this business than I’ll ever know, and I just would never do it to him.” I said, “I can’t guarantee what’s going to come out of that discussion when you’re out of the room, but I can tell you that it’s going to be about what’s best for the bank.” So they said, “Okay, we’ll do it if you meet with us earlier for breakfast,” and I said, “You know, there’s really nothing else for me to discuss with you guys. I’m doing exactly what is right, and you should be proud of that fact.” I just paused. After what seemed

25

like a couple minutes, they said, “Okay. We’ll leave the room.” I can’t tell you the feeling of comfort that I had, to know that I could call St. Clair and say, “Listen, here’s what’s going to happen.”

The next morning—first of all, they [Cheleden and Preston] got up and left the boardroom, and everybody said, “Where are they going? Why are they leaving?” And St. Clair said, “I’ve been thinking long and hard about this. I’ve gotten wind that you guys are meeting outside. My biggest concern is for the welfare of this bank, and I think that it would be only proper for the board to terminate me under my agreement so that everything here can move forward, and T.K. is now going to tell you why you need to do this and why he has to be part of it,” and turned it over to me. I shared with the board what their fiduciary responsibilities were, what their legal responsibilities were about duty of loyalty and duty of care, which are the two legal responsibilities that a public company director has, and not to have a conflict of interest and to act in the best interest of the shareholders and the company.

And sort of gave this talk and told why. There were a couple people that were opposed to it and said, “Walt, you don’t have to do this. We’re very supportive.

We’ll fight this out.” A couple of the new board members who were more savvy and involved in public companies said, “You know, you aren’t listening to what T.K. just reviewed with you. He’s telling you your legal responsibilities, and that makes us all liable if we don’t do what’s right, and what he’s proposing is the best step for the bank to take.”

C.G. CHELEDEN: Here’s what happened: After the new budget and that they were way off the new budget and more write-downs and I wrote all the directors, FedEx’d to their home before that meeting, right?

I mean they would have gotten it a day or two before that August meeting, so the night before the meeting I’m in my backyard. I’m preparing for the next day. I get a call from Tom Kerstetter.

He said, “Would you and Tom Preston mind sitting out the first part of the meeting? There’s some things the board wants to discuss that may be helpful to you, or discuss your letter.” I got the hint that something was up, okay, and that he was urging for maybe a change or something. “Yeah, okay, that’s fine.

We’ll wait out in the candy room,” then he comes out and says, “We got fired and here, it’s your meeting,” and they left.

Okay, then we came into the room and they appointed me chairman of the search committee and actually I think St. Clair, he was still in the room.

From Crisis to Triumph | The Rebirth of WSFS

This was all a surprise to me, I mean other than the hint the day before that there was going to be a change. We talked about a press release, and then I asked Kerstetter if he could stay on until we found a new CEO just as interim and then they made me interim chairman and then we had another meeting.

This never amazed me more, okay. That was a Thursday. I’m on my way after that meeting, I’m still in a little shock.

“ I was determined if WSFS was savable that I was going to be part of it... it was a challenge and I had thrift experience and I was only 40-something so…

I just took it. It all lined up.

The stars were aligned.

There’s not one other time in my career I could have handled it, so…

I’d say it was destiny.”

– C.G. Cheleden

I was determined if WSFS was savable that I was going to be part of it and, you know, it was a big investment for me. I had to look out after that and it was a challenge and I had thrift experience and I was only 40-something so…

I just took it. It all lined up. The stars were aligned. There’s not one other time in my career I could have handled it, so…I’d say it was destiny.

T.K. KERSTETTER: Cheleden and Preston were invited back into the room. Eventually, the board accepted [that St. Clair and Kerstetter had to be terminated], and they were invited back into the room and, I’m guessing, were quite surprised what had occurred while they were out of the room. At that moment there was some small discussion, and St. Clair and I were excused from the room so that they could all talk. His office was 20 steps down the hall from the boardroom.

So we were sitting in the office reflecting on how difficult a day this was, and five minutes later there was a knock on the door, and they said, “We want to see Mr. Kerstetter.” The look on St. Clair’s face, I’ll never forget it. He subsequently passed away, but I’ll never forget the look and the blood that drained from his face because I think he thought, in some way, that he had been set up by somebody who was his friend and he valued. He didn’t know anything, but just for them to come back and ask to see just me. So I went into the boardroom and they said, “Listen, first of all, we want to tell you that Cheleden is now chairman of the board,” and I thought to myself, “How could that happen in five minutes?” It is just beyond me that in five minutes he is now chairman of the board.

Then they said, “We want to say that we just are very impressed how you handled yourself, and we want to say that you don’t have to leave.” I said, “I’m flattered that you would say that, but here’s the reality: I know—” and I looked at Cheleden at the time—I said, “I know I’m not a candidate for the top spot. You guys are going to want to bring in somebody that is a clean slate.

I think the regulators would find it more attractive that you take the CEO and the COO and make a clean move.” I said, “As much heart and soul as I have into this, I really got to tell you that I don’t think it’s the right move. The other reason is I hope some of you could appreciate that I could never walk back into that room and tell St. Clair that he’s leaving but I’m not, after everything that he and I have been through with this. There’s no way I could ever do that.”

27

So they respected that. They excused me again. I went back, and when I walked in [St. Clair’s] office, he said, “They asked you to stay. Didn’t they?” I said, “Yes.” He said, “Did they offer you the job?” I said, “No.” I said, “Walt, I would never do that. I would never make this look like it was some way of doing it.” You could just see the blood return to his face. It was a very telling moment of corporate intrigue that you just can’t share. People get the chance in their lives to step up and do the right thing sometimes even though it’s not best for them. There were certainly other ways that this could [have been] orchestrated, but to know that the best thing for the bank, at the time, was for me to leave is one of those ethical moments where people get tested on what their fiber is. I’m not sure everybody gets something as big as that, but that’s when I knew that I had passed an internal test for me and that I could help other people.

No one had to feel sorry for me. I had an agreement that paid me out. It certainly wasn’t enough to live on very long, but it certainly was nicer than what other people might be afforded. But I was also leaving something, and I worried a lot about my reputation because that was a big deal. Interestingly enough, they came back again to the door and asked to see me again and said, “Would you consider staying for an interim period to help us find the replacement?” I saw that as a way to say, “Yeah, by association I was part of the problem, but I’m also part of the solution.” So I told them that if they would honor an outplacement program or an opportunity for me to be successful after this interim, I would do that interim period, The News Journal, August 26, 1990 what ended up to be about three or four months. So I was the interim, quote, CEO if you will or interim COO. But the most challenging part of that is they asked me to be the one that would explain what had happened to the press on the following day. What I didn’t know is that there would be TV stations down from Philadelphia.

I walk into a room that had all these cameras set up and mics sitting on the table, and I thought I was going to be meeting with The News Journal. I had to explain how the bank had made a change, and St. Clair and I were terminated under our agreements but that I was staying, but I wasn’t a candidate for the permanent position. Nobody understood what I had said because it didn’t make sense. Anyway, I had that meeting, and it was pretty challenging.

I will say that Cheleden had created a very good system to find a replacement.

He set up the scenario for the bank and had people send in business plans and strategy plans for, if they were CEO, how they would make change. He shared those with me and had asked me for my two cents, whatever that was worth.

The interesting part for me is when Skip Schoenhals came to town to interview, I’m actually the one that picked him up at the airport. We had, as you might expect, a very interesting conversation. He certainly ended up being the right guy for the job.

From Crisis to Triumph | The Rebirth of WSFS

C.G. CHELEDEN: Okay, I talked to some of the other big shareholders… and they all had their candidate they wanted to put in and I said, “Not so fast.”

We got to have a diligent search thing where we put ads in the big papers and got about 120 responses. Sent out 60 case studies, got 45 back or something.

You know, I had thoughts maybe I’d be the CEO and the candidate would be the COO, but the board said, “No. We want one person in charge and we don’t want you guys dividing up the thing,” so that’s fine, but I was offered the job.

Joe Julian said, “Before we go through all this nonsense, isn’t there somebody in this room that could handle this job?” I knew I’d have to move to Delaware, give up the law practice that I was just starting, move my family…I had a young family and I guess in the back of my mind I wasn’t sure I could do it, you know, when it came to me, so I said, “No, let’s go on with the search.”

That “diligent search” resulted in the arrival on scene of the next leader to become part of WSFS history: Skip Schoenhals.

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Marvin N. “Skip� Schoenhals WSFS President & CEO, 1990-2009 Chairman, 1992-2017, pictured here shortly after moving from Michigan to take over the helm at WSFS.

From Crisis to Triumph | The Rebirth of WSFS

Star States Names New CEO— 1990—Skip Schoenhals Arrives Walt St. Clair and T.K. Kerstetter were out as top leadership, leaving WSFS with a clean slate. Newly minted WSFS Board Chairman C.G. Cheleden set up shop within WSFS to determine just how bad things were. He brought in business workout specialist Pat Muldoon to assess the loan portfolio. As they were sorting through the loans, OTS regulators showed up unannounced for a surprise visit to find out how WSFS was being managed after the change in leadership.

C.G. CHELEDEN: I was running the bank from an eye level. I’m talking to the lenders about this loan, that loan, this joint venture you know and then the hole in the ground and our poor OCS examination results, and it’s all not good news, right. It felt like a sinking ship. About a week after that, I’m in the office over there and my assistant says, “Mr. Cheleden, the OTS is here to see you.” Just a cold call to ask, “What’s going on here?”

The next order of business for C.G. was to recruit new leadership for WSFS. They needed a president who had the banking chops not only to reassure regulators, shareholders and customers, but also to firm up WSFS’s financial footing.

C.G.: Joe Julian addressed the board and said, “Before we go through all this nonsense, isn’t there somebody in this room that could handle this job?” I knew I’d have to move to Delaware, give up the law practice that I was just starting, move my family ... I had a young family and I guess in the back of my mind I wasn’t sure I could do it you know, when it came to me so I said, “No, let’s go on with the search.”

To find the perfect candidate, C.G. devised what Skip Schoenhals would later call “one of the most unusual ways to conduct a search,” using major business publications to invite interested parties to review a case study and respond in writing with a solution. Skip’s response—submitted at the last minute, and almost not at all—got him in the door and positioned him for the seat at the top.

SKIP: Ads ran in American Banker and The Wall Street Journal inviting applicants to complete a case study that described the condition of the bank.

Respondents were asked to complete the case study, which essentially meant writing a business plan of how to lead the bank to solvency….

I got that case study probably late September, maybe even early October. Like I said, I was one of the last ones to get it in. Probably September. This bank that I sold, I had stopped working there in December the previous year. By the middle of, say by August, I’d been looking for a job for eight months. I had come close on several, but they didn’t work out. Immediately preceding

31

getting that case study, I had connected with a headhunter and was one of two finalists for a bank in Wilkes-Barre, Pennsylvania. It was a bank of about $600–700 million. Bigger than any bank I’d run up to that point. The bank I’d been president of, that I sold, was somewhere around $400 million, so it was a step up. It would have been a nice job, looked like on paper. Turns out I’m so glad it didn’t work out.

The headhunter that was working on this, we went into the final weekend where both candidates were back there to be interviewed, and the headhunter assured me I was in first place going in. I didn’t get the offer. The other guy got the offer. Well, that was a letdown. Then the other guy didn’t take it, but they didn’t come back to me. The reason they didn’t come back to me is the other guy had been coming from big banks down. I was coming [from] smaller going up. They decided, even though they had all agreed I was the second-place candidate, that after this other guy, no, they wanted somebody coming down the food chain.

That was a huge blow to me. I was so discouraged from that. Literally, probably within a week’s time of that, or very shortly after, I remember reading the ad in both the American Banker and The Wall Street Journal for this company of Star States in Delaware. I kind of knew where Delaware was because I went to Wharton for my MBA, but Star States—who’s ever heard of that? It almost passed me by, but once I figured out it was a bank holding company, I did send my resume in. I get the case study back. I remember going to the mailbox, getting this big envelope, and there was this letter that said, “Thank you for your resume. We’d like you to do this case study.” I looked at it and it was a billion-and-a-half-dollar bank. I had just been put out on my butt because I wasn’t good enough for a $700 million bank.

I walked into the house and Linda, my wife, I told her this, I said, “I’m not even going to bother to apply.” I was so discouraged. Linda, in one of those just wonderful and clarifying, I call fog-cutter questions, she said, “Skip, if they called you up for an interview, would you go?” I said, “Well, of course I’d go.”

She said, “Would you prepare for the interview, do some homework?” I said, “Of course I would.” She said, “Then why don’t you look at this as preparing for the interview?” Changed my mindset in 30 seconds. A case study plays into two of my strengths that God’s blessed me with. I’m a great analyzer of problems—do good analytics—and I’m a very good written communicator.

Replying to a case study, if you need two things going into it, it’s that, and the rest is history. I don’t know if left to my own devices if I ever would have picked up the case study again or not—doesn’t matter—but I came close to throwing it in the trash bin. My wife saved me from it.

The genius of the case study was I walked in here with a plan laid out. Part of it was to sell the B. Gary Scott Company and other parts of it. There was a deadline to get this done. I only [had] like a week to do it. Back then, computers and word processors were pretty rudimentary…and I’m redoing, I’m

From Crisis to Triumph | The Rebirth of WSFS

“ I only [had] like a week to [complete the case study].

Back then, computers and word processors were pretty rudimentary…and I’m redoing, I’m editing this. The FedEx guy is in my driveway waiting for me to finish this, for it to print out again.”

– Marvin N. “Skip” Schoenhals

editing this. The FedEx guy is in my driveway waiting for me to finish this, for it to print out again so I can give it to him to get it out to him. Remember it well.

Eighty-six case studies were sent out, and 45 responses were submitted. Based on the responses, six individuals were invited to Wilmington for interviews.

Fortunately, I was one of those, and I became the CEO on November 1, 1990. The beauty of the case study was the element of speed it lent to the hiring process, and the fact that I arrived with a plan already in my head.

JOE JULIAN: CG suggested the way we should recruit the next CEO. Instead of going through a headhunter, we put an ad in the Wall Street Journal and developed a case study for the candidates. The case study was a hypothetical company with hypothetical issues and we asked how they would improve the standing of the company. Of course, the hypothetical company was actually WSFS and those hypothetical issues were very real.

We culled the list down and three of the four were local. There was a great deal of discussion among the board about the need for someone local, who knew the markets. But we agreed that the best paper came from some guy in Michigan. He laid out exactly what we needed to do. We interviewed the three local guys and then thought we might as well let the Michigan guy interview.

Skip presented and he hit it out of the park. After he left the interview, we all said, “He’s the guy.”

Just who was this man from Michigan with a plan to save WSFS? A November 1990 Wilmington News Journal story provided the stats: Source: Lansing State Journal

After earning his MBA at the University of Pennsylvania, Skip returned to his native Michigan to pursue a career in banking in 1973. In his first year with the Bank of Commerce of Lansing, he already showed his aptitude and earned a promotion to assistant vice president.

Marvin B. Schoenhals Title: President, Chief Executive Officer, Star States Corp.

Family: Married, 8-year-old daughter Education: BBA, University of Michigan, 1969; MBA, University of Pennsylvania, 1971.

Hometown: Kalamazoo, Mich.

Activities: Mayor, Owosso, Mich.; Chairman, Livingston County (Mich.)

United Way Campaign; President, Rotary Club of Owosso.

Hobbies: Woodworking, cooking, reading.

Strengths: “My ability to recognize problems and define plans; to create a vision and to get people to work toward that.”

Weaknesses: “Sometimes I get bored with routine.”

Dealing with mad shareholders: “Every single person wants what we want: to return Star States to its former standing. When presented with a good plan and track record, shareholders will support what we’re doing.”

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Those who knew Skip professionally also weighed in, painting a picture of the seasoned banking executive who earned a reputation over 17 years as a turnaround guy: He’s a troubleshooter, and a good one…. He’s forthright and low-key, one of the most un-banklike people I’ve ever met.

He gets rid of nonperforming loans and nonperforming people.

Very thoughtful and methodical.

Many businessmen are linear thinkers…. Not Skip. He understands the interrelationship between problems.

His rapport with regulators is unbelievable…. He’s a straight shooter.

CHIP CLIFTON: Well, he came in very confident, very personable. Made a point to meet people and reassure them that he was going to do whatever it took to bring us out of this. I think he recognized the reputation of the bank within the community and felt that we had a viable enterprise here and kept everybody pretty well informed. Obviously he couldn’t tell everybody anything, but he certainly did not give any false hopes, meaning that he was honest, but still confident in the bank’s ability to do what we needed to do.

Before heading to Delaware, Skip developed a reputation as a thrift turnaround master after resurrecting three Michigan banks: Pacesetter Savings Bank, Sterling Savings and Loan and People Savings Bank. He took People Savings Bank public in 1987 and sold it one year later for nearly twice its initial value.

The relationships he developed with federal regulators during that time were put to the test when he took over WSFS and asked for more time to turn the struggling bank around.

Now privately, I know he was getting estimates on the pictures on the wall and everything like that, so keeping a positive face in light of all that, I commend him for that. Not only that, but the pressures of shareholders and Board members and things of that nature. But he did come in kind of on a white horse, so he did have a lot of people behind him to try to help him.

Skip’s own take on the task ahead of him? “We must deal with the mistakes and go back to the heritage of being a class act.

But it will require patience to deal with the problems.”

End of Part I Skip, C.G. and the WSFS team had to make hard decisions in the years to follow. Those decisions not only saved WSFS but positioned the bank for success that continues to this day. Those key events are the focus of From Crisis to Triumph, Part II: 1991 to 1995, WSFS Survives and Triumphs.

From Crisis to Triumph | The Rebirth of WSFS

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From Crisis to Triumph | The Rebirth of WSFS