WSFS Reports 1Q 2021 EPS of $1.36 and ROA of 1.85%; Results Reflect Diversified Revenue and Improving Credit Trends; Board Approves an 8% Increase in Cash Dividend

Thursday, 22. April 2021 22:07

WILMINGTON, Del., April 22, 2021 (GLOBE NEWSWIRE) -- WSFS Financial Corporation (Nasdaq: WSFS), the parent company of WSFS Bank, today announced its financial results for the first quarter of 2021.

Selected quarterly financial results and metrics are as follows:

             
(Dollars in millions, except per share data) 1Q 2021 4Q 2020 1Q 2020
Net interest income $114.2  $123.0  $116.2 
Fee income 47.8  46.6  40.8 
Total net revenue 162.0  169.6  157.0 
(Recovery of) provision for credit losses (20.2)  (0.9 56.6 
Noninterest expense 95.6  93.4  88.5 
Net income attributable to WSFS 65.1  59.8  10.9 
Pre-provision net revenue (PPNR)(1) 66.4  76.3  68.5 
Earnings per share (diluted) 1.36  1.20  0.21 
Return on average assets (ROA) 1.85% 1.73% 0.36%
Return on average equity (ROE) 14.9  13.0  2.4 
Efficiency ratio 58.9  55.0  56.3 

GAAP results for the quarterly periods shown below included the following items that are excluded from core results. For 1Q 2021, the $1.8 million of corporate development and restructuring expense primarily relates to our pending combination with Bryn Mawr Bank Corporation (“Bryn Mawr”) anticipated to close in early 4Q 2021.

  1Q 2021 4Q 2020 1Q 2020
(Dollars in millions, except per share data) Total
(pre-tax)
 Per share
(after-tax)
 Total
(pre-tax)
 Per share
(after-tax)
 Total
(pre-tax)
 Per share
(after-tax)
Securities gains $0.3  $0.01  $3.2  $0.05  $0.7  $0.01 
Unrealized gain on equity investments, net         0.7  0.01 
Corporate development and restructuring expense 1.8  0.04  0.3  0.01  1.3  0.02 
Contribution to WSFS Community Foundation         3.0  0.04 

(1) As used in this press release, PPNR is a non-GAAP financial measure calculated as net revenue before provision for credit losses and net of noninterest expense. For a reconciliation of this and other non-GAAP financial measures to their comparable GAAP measures, see "Non-GAAP Reconciliation" at the end of the press release.

CEO Commentary

Rodger Levenson, Chairman, President and CEO, said, “Our 1Q results included a core ROA(2) of 1.89%, a 20% increase in year-over-year core fee revenue(2), and improvement across key credit metrics. Our solid operating results and strong capital position continue to provide momentum to capture significant organic growth opportunities.

“The quarter reflected the strengthening of our Customers’ financial health from improved macroeconomic conditions and outlook along with benefits from government stimulus programs. These positive economic developments combined with improved credit quality metrics resulted in a $24.0 million release of our allowance for credit losses (“ACL”) during the quarter, while still maintaining a significant ACL coverage ratio of 2.51% (excluding Paycheck Protection Program (“PPP”) loans) at March 31st.

“Throughout the pandemic, we have focused on serving our Customers and investing in franchise growth. During the quarter, we supported nearly $300 million of second round PPP loans to over 1,800 WSFS and non-WSFS Customers. We also were excited to announce our agreement to combine with Bryn Mawr during the quarter. When combined WSFS will be the premier, locally-headquartered, bank and wealth management franchise in the Greater Philadelphia and Delaware region.

“We were honored to be ranked number 10 on the Forbes 12th Annual America's Best Banks list and to receive The Gallup Exceptional Workplace Award for the fifth time during the quarter. These recognitions demonstrate our commitment to sustainable long-term high performance driven by our talented and engaged Associates.”

(2) As used in this press release, core ROA and core fee revenue (noninterest income) are non-GAAP financial measures. Core ROA is calculated as GAAP ROA less certain pre-tax adjustments and the tax impact of such adjustments and core fee revenue excludes securities gains and unrealized/realized gains on equity investments, net. For a reconciliation of these and other non-GAAP financial measures to their comparable GAAP measures, see "Non-GAAP Reconciliation" at the end of the press release.

Highlights for 1Q 2021: 

  • Core ROA was 1.89% in 1Q 2021 compared to 0.39% for 1Q 2020.

  • Core EPS(3) was $1.39 in 1Q 2021 compared to $0.23 for 1Q 2020.

  • Total net credit (recoveries) costs were $(19.0) million and net charge-offs were $3.8 million, or 0.18% of average gross loans during the quarter. 1Q 2021 results reflected $24.0 million release of ACL as credit quality improved quarter-over-quarter, including declines in problem assets, nonperforming assets, and delinquencies. The ACL coverage ratio was 2.51%, excluding PPP loans, at March 31, 2021.

  • Core fee revenue (noninterest income) was $47.5 million, an increase of $8.0 million, or 20% compared to 1Q 2020. The increase included $2.2 million of referral fees related to PPP round two loans and growth across most fee businesses reflecting the diversity of our business model offset by a $2.7 million year-over-year adverse impact from the Durbin Amendment on debit fees and the lower interest rate environment on Cash Connect® bailment fees.

  • WSFS supported nearly $300 million of second round PPP loans, which are not on the balance sheet, to over 1,800 WSFS and non-WSFS Customers during the quarter. $231.4 million of round one PPP loans were forgiven during the quarter and $526.8 million remain as of March 31, 2021.

  • The Board of Directors approved a quarterly cash dividend of $0.13 per share of common stock, an 8% increase from our cash dividend in 4Q 2020. During the quarter, WSFS repurchased 267,309 shares at an average price of $44.97, totaling $12.0 million.

(3) As used in this press release, core EPS is a non-GAAP financial measure. This non-GAAP financial measure excludes certain pre-tax adjustments and the tax impact of such adjustments. For a reconciliation of this and other non-GAAP financial measures to their comparable GAAP measures, see "Non-GAAP Reconciliation" at the end of the press release.

First Quarter 2021 Discussion of Financial Results

Balance Sheet

The following tables summarize loan and lease and customer deposit balances and composition at March 31, 2021 compared to December 31, 2020 and March 31, 2020:

Loans and Leases            
(Dollars in thousands) March 31, 2021 December 31, 2020 March 31, 2020
Commercial & industrial $3,212,970  38% $3,299,118  37% $3,412,266  40%
Commercial real estate (CRE) 1,975,966  23  2,086,062  23  2,223,117  26 
PPP 526,789  6  751,199  8     
Construction 784,101  9  716,275  8  626,253  8 
Commercial small business leases 264,937  3  248,885  3  201,753  2 
Total commercial loans 6,764,763  79  7,101,539  79  6,463,389  76 
Residential mortgage 829,234  10  954,824  11  1,054,544  13 
Consumer 1,140,034  13  1,165,917  13  1,118,287  13 
ACL (204,818)  (2)  (228,804 (3 (139,073 (2
Net loans and leases $8,529,213  100% $8,993,476  100% $8,497,147  100%
 


Customer Deposits            
(Dollars in thousands) March 31, 2021 December 31, 2020 March 31, 2020
Noninterest demand $3,857,610  31% $3,415,021  29% $2,314,982  25%
Interest-bearing demand 2,659,336  22  2,635,740  23  2,093,388  22 
Savings 1,886,222  16  1,774,332  15  1,594,735  17 
Money market 2,721,647  22  2,654,439  23  2,149,119  23 
Total core deposits 11,124,815  91  10,479,532  90  8,152,224  87 
Customer time deposits 1,093,984  9  1,158,845  10  1,272,154  13 
Total customer deposits $12,218,799  100% $11,638,377  100% $9,424,378  100%
 

At March 31, 2021, WSFS’ net loan and lease portfolio decreased $464.3 million when compared with December 31, 2020, including a $224.4 million decrease in PPP loans. Excluding PPP loans, purposeful run-off portfolios, and the ACL, loans decreased $107.6 million, or 1% (not annualized), during the quarter. The decrease in the quarter was primarily due to lower commercial loan demand resulting from higher levels of borrower liquidity.

Net loans and leases at March 31, 2021 increased $32.1 million when compared with March 31, 2020. Excluding PPP loans, run-off portfolios, and the ACL, loans increased $55.9 million, or 1%, year-over-year, including growth across construction, commercial small business leases, and home equity installment loans originated through our partnership with Spring EQ.

Total customer deposits were $12.2 billion at March 31, 2021, a $580.4 million increase from December 31, 2020 and a $2.8 billion increase from March 31, 2020, reflecting elevated deposits from customers who received PPP loans, government stimulus impact, and lower customer spending. Core deposits were $11.1 billion at March 31, 2021, an increase of $645.3 million over the prior quarter primarily due to approximately $258.8 million of deposits from the second round of PPP loans and continued elevated customer liquidity. Core deposits were a strong 91% of total customer deposits and no- and low-cost checking accounts represented a robust 53% of total customer deposits at March 31, 2021. These core deposits predominantly represent longer-term, less price-sensitive customer relationships. The ratio of net loans and leases to customer deposits was 70% at March 31, 2021 reflecting significant liquidity capacity.

Net Interest Income

 Three Months Ending
(Dollars in thousands) March 31, 2021 December 31, 2020 March 31, 2020
Net interest income before purchase accretion and PPP $93,524  $97,741  $101,941 
Purchase accounting accretion 11,295  14,754  14,209 
Net interest income before PPP 104,819  112,495  116,150 
PPP 9,366  10,506   
Net interest income $114,185  $123,001  $116,150 
       
Net interest margin before purchase accretion and PPP 3.10% 3.36% 3.85%
Purchase accounting accretion 0.37  0.51  0.53 
Net interest margin before PPP 3.47  3.87  4.38 
PPP 0.12  0.06   
Net interest margin 3.59% 3.93% 4.38%

1Q 2021 results were significantly impacted by continued high levels of excess customer liquidity described above. The additional customer deposits reduced our net interest margin by approximately 39 bps compared to 1Q 2020 and 18 bps from 4Q 2020.

Net interest income decreased $2.0 million, or 2%, compared to 1Q 2020, due to a $8.3 million reduction primarily from the lower rate environment and $2.9 million of lower purchase accounting accretion, partially offset by $9.4 million of PPP income in 1Q 2021 including $7.8 million of fee accretion. Net interest margin decreased 79 bps from 1Q 2020 due to 39 bps from the significant short-term liquidity increase in customer deposits, a 36 bps net decline from the lower rate environment and balance sheet mix, and 16 bps from lower purchase accounting accretion, partially offset by a 12 bps increase from PPP.

Net interest income decreased $8.8 million, or 7% (not annualized), from 4Q 2020 due to a $4.2 million reduction primarily from lower loan balances and lower yields from turnover in our loan and investment portfolio, a $3.5 million decrease in purchase accounting accretion and $1.1 million of lower PPP income. Net interest margin decreased 34 bps including 18 bps from the significant short-term liquidity increase in customer deposits, 14 bps from lower purchase accounting accretion, and 12 bps from lower loan balances and investment yields, partially offset by a 6 bps increase from PPP and 4 bps from lower funding costs.

Credit Quality

Credit quality improved across all leading metrics during the quarter, including total problem assets which were $723.6 million at March 31, 2021 compared to $766.0 million at December 31, 2020. Total problem assets includes all criticized, classified, and nonperforming loans as well as other real estate owned (OREO).

Delinquencies decreased to $69.3 million at March 31, 2021, or 0.81% of gross loans, and are relatively consistent with longer term historical trends. Nonperforming assets declined to $49.5 million at March 31, 2021 primarily due to the positive resolution of one $15.0 million multi-family commercial relationship that went nonperforming in 4Q 2020. Customer loans receiving short-term loan modifications at March 31, 2021 were $110.9 million, or 1% of the loan portfolio excluding PPP. Net charge-offs for 1Q 2021 were a low $3.8 million, or 0.18% (annualized), of average gross loans.

Total net credit (recoveries) costs were $(19.0) million in the quarter compared to $(0.5) million in 4Q 2020, and the ACL decreased to $204.8 million as economic forecasts improved from the prior quarter and new loan originations were mainly offset by normal portfolio run-off.

The following table summarizes credit quality metrics as of and for the period ended March 31, 2021 compared to December 31, 2020 and March 31, 2020.

(Dollars in millions)March 31, 2021 December 31, 2020 March 31, 2020
Problem assets$723.6  $766.0  $221.9 
Nonperforming assets49.5  60.5  38.1 
Delinquencies69.3  78.9  59.8 
Net charge-offs3.8  3.0  1.0 
Total net credit (recoveries) costs (r)(19.0) (0.5 57.1 
Problem assets to total Tier 1 capital plus ACL46.72% 50.67% 14.68%
Classified assets to total Tier 1 capital plus ACL32.63  35.02  12.64 
Ratio of nonperforming assets to total assets0.34  0.42  0.31 
Ratio of nonperforming assets (excluding accruing TDRs) to total assets0.23  0.31  0.20 
Delinquencies to gross loans0.81  0.88  0.69 
Ratio of quarterly net charge-offs to average gross loans0.18  0.13  0.04 
Ratio of allowance for credit losses to total loans and leases (q)2.36  2.51  1.60 
Ratio of allowance for credit losses to nonaccruing loans644  546  722 

See “Notes”

Core Fee Revenue

Core fee revenue (noninterest income) was $47.5 million, an increase of $8.0 million, or 20%, compared to 1Q 2020, including a $2.7 million decrease in interchange fees resulting from the Durbin Amendment effective at the beginning of 3Q 2020 and $2.2 million of referral fees related to PPP round two loans during the quarter. The year-over-year increase also included $5.1 million of mortgage banking fees resulting from lower interest rates and improved secondary market conditions, $2.8 million of Trust services revenue, and $0.9 million of other wealth services revenue. Other banking fee revenue increased $1.7 million, excluding the impact of the Durbin Amendment and PPP referral fees, due primarily to a $0.8 million gain on sale of an acquired loan that was included in our run-off portfolio and $0.7 million of one-time items that reduced fee revenue in 1Q 2020. Partially offsetting these increases was a $2.0 million decrease in Cash Connect® year-over-year primarily driven by the significant decline in interest rates compared to the prior year and fully offset by lower funding costs.

Core fee revenue increased $4.0 million, or 9%, compared to 4Q 2020, due to $2.2 million of PPP round two referral fees in the quarter, a $1.9 million increase in mortgage banking revenue, and a $0.8 million increase in wealth management fees. Partially offsetting these increases was a $0.6 million decrease in gains on sale of SBA loans.

For 1Q 2021, core fee revenue was 29.3% of core net revenue compared to 25.3% at 1Q 2020, and was diversified among various sources, including traditional banking, mortgage banking, trust and wealth management and cash logistics services (Cash Connect®). The year-over-year percentage comparison includes the impact of lower net interest income due to the lower rate environment and PPP round two referral fees in the current quarter, offset by the adverse impacts of the Durbin Amendment.

Core Noninterest Expense(4)

Core noninterest expense of $93.8 million for 1Q 2021 increased $9.6 million compared to $84.2 million in 1Q 2020, primarily due to a $7.8 million increase in salaries and benefits. The increase included $2.9 million from salaries due to franchise growth, $2.6 million from higher incentive compensation, and $0.8 million from higher state unemployment rates. Additionally, equipment expenses increased $2.4 million primarily due to higher third-party software expense related to our ongoing delivery transformation initiatives.

When compared to 4Q 2020, core noninterest expense increased $0.7 million primarily due to $1.7 million of seasonally higher salaries and benefits costs, partially offset by $1.0 million of lower net other operating costs.

Our core efficiency ratio(4) was 57.9% in 1Q 2021, compared to 55.8% in 4Q 2020 and 54.0% in 1Q 2020.

Income Taxes

We recorded a $21.4 million income tax provision in 1Q 2021, compared to $17.5 million in 4Q 2020 and $1.3 million in 1Q 2020. The effective tax rate was 24.7% in 1Q 2021, 22.6% in 4Q 2020, and 10.9% in 1Q 2020. The year-over-year increase primarily reflects a one-time tax benefit of $1.8 million related to the Coronavirus Aid, Relief, and Economic Security Act, as amended (“CARES Act”), in 1Q 2020.

(4) As used in this press release, core noninterest expense and core efficiency ratio are non-GAAP financial measures. These non-GAAP financial measures exclude corporate development and restructuring expense and the contribution to the WSFS Community Fund. For a reconciliation of these and other non-GAAP financial measures to their comparable GAAP measures, see "Non-GAAP Reconciliation" at the end of the press release

Capital Management

The Board of Directors approved a quarterly cash dividend of $0.13 per share of common stock, an 8% increase from 4Q 2020. This dividend will be paid on May 21, 2021 to stockholders of record as of May 7, 2021.

During 1Q 2021, WSFS repurchased 267,309 shares at an average price of $44.97, totaling $12.0 million. WSFS has 4,381,161 shares, or approximately 9% of outstanding shares, remaining to repurchase under our current authorization.

WSFS’ total stockholders’ equity decreased $21.1 million, or 1% (not annualized), during 1Q 2021, primarily due to a $69.8 million market-value decrease on available-for-sale securities, $12.0 million of share repurchases, and the dividend on common stock paid during the quarter, partially offset by quarterly earnings.

WSFS’ tangible common equity(5) decreased $18.4 million, or 1% (not annualized) compared to December 31, 2020 for the reasons described above. WSFS’ common equity to assets ratio was 12.02% at March 31, 2021, and our tangible common equity to tangible assets ratio(5) decreased by 38 bps during the quarter to 8.58%.

At March 31, 2021, book value per share was $37.27, a decrease of $0.25, or 1%, from December 31, 2020, and tangible common book value per share(5) was $25.60, a decrease of $0.25 from December 31, 2020.

At March 31, 2021, WSFS Bank’s Tier 1 leverage ratio of 9.82%, Common Equity Tier 1 capital ratio and Tier 1 capital ratio of 13.20%, and Total Capital ratio of 14.46% were all substantially in excess of the “well-capitalized” regulatory benchmarks.

(5) As used in this release, tangible common equity, tangible common equity to tangible assets and tangible common book value per share are non-GAAP financial measures. These non-GAAP financial measures exclude goodwill and intangible assets and the related tax-effected amortization. For a reconciliation of these and other non-GAAP financial measures to their comparable GAAP measures, see "Non-GAAP Reconciliation" at the end of the press release.

Selected Business Segments (included in previous results):

Wealth Management

The Wealth Management segment provides a broad array of planning and advisory services, investment management, trust services, and credit and deposit products to individual, corporate, and institutional clients through multiple integrated businesses. Combined, these businesses had $24.7 billion in assets under management (AUM) and assets under administration (AUA) as of March 31, 2021. 

Wealth Management reported pre-tax income of $9.3 million in 1Q 2021 compared to $3.8 million in 1Q 2020, and $9.2 million in 4Q 2020.

For 1Q 2021, total revenue (net interest income and fee income) was $19.2 million, an increase of $4.4 million, or 30%, compared to 1Q 2020 and flat compared to 4Q 2020. The year over year increase was due to strong results across all Wealth Management lines of business.

WSFS Institutional Services®’s revenue of $7.8 million in 1Q 2021 was up 51% from 1Q 2020 and up 4% from 4Q 2020. Growth in our corporate trust business was supported by continued strength in the debt securitization market as reflected by a 12% increase in our transaction volume relative to 4Q 2020.

Revenue from our advisory businesses, consisting of West Capital Management®, Cypress and WSFS Wealth® Investments, totaled $4.2 million in 1Q 2021 compared to $3.4 million in 1Q 2020, and $3.5 million in 4Q 2020. Net AUM at the end of 1Q 2021 was 2% lower (non-annualized) than 4Q 2020 due to client outflows, but increased 17% from 1Q 2020 primarily from strong equity market performance.

Total noninterest expense (including intercompany allocations and excluding provision for credit losses) was $10.4 million in 1Q 2021, compared to $9.4 million in 1Q 2020 and $10.0 million in 4Q 2020. Wealth Management efficiency ratio was 47% in 1Q 2021, compared to 58% in 1Q 2020 and 47% in 4Q 2020.

Cash Connect®

Cash Connect® is a premier provider of ATM vault cash, smart safe and cash logistics services in the United States. Cash Connect® services over 33,000 non-bank ATMs and retail deposit safes nationwide supplying or servicing approximately $1.7 billion in cash at March 31, 2021. Cash Connect® also supports over 600 ATMs for WSFS Bank Customers, which is one of the largest branded ATM networks in our market.

Cash Connect® reported pre-tax income of $1.7 million for 1Q 2021, which was a decrease of $0.3 million, or 15%, compared to 1Q 2020 primarily due to allocated expenses. Pre-tax income in 1Q 2021 was $0.5 million lower than 4Q 2020, driven by timing of insurance related expenses. ROA of 1.29% in 1Q 2021 decreased 55 bps from 1Q 2020 and decreased 45 bps from 4Q 2020. Normalized for insurance costs of $0.4 million due to timing, 1Q 2021 pre-tax income was $2.1 million, and ROA was 1.59%.

Net revenue of $10.1 million in 1Q 2021 was down $0.9 million from 1Q 2020, driven by the lower interest rate environment, fully offset by lower cost of funds (including lower third party funding fees in noninterest expense) and higher cash volume. Compared to 4Q 2020, net revenue decreased $0.2 million driven by a decrease in volume of ATM transaction volume-related activity.

Noninterest expense (including intercompany allocations of expense) was $8.4 million in 1Q 2021, a decrease of $0.6 million compared to 1Q 2020 driven by lower funding fees as noted above, and $0.2 million higher compared to 4Q 2020.

During 1Q 2021, Cash Connect® saw continued growth in its smart safe and ATM managed services, adding 337 units and 514 units, respectively. The division's total cash managed increased 11% (not annualized), exceeding $1.7 billion at the end of 1Q 2021, as Cash Connect continues to partner with retailers and top financial institutions providing logistics and serving cash solutions nationwide.

First Quarter 2021 Earnings Release Conference Call

Management will conduct a conference call to review 1Q 2021 results at 1:00 p.m. Eastern Time (ET) on Friday, April 23, 2021. Interested parties may listen to this call by dialing 1-877-312-5857 and using Conference ID #4169716. A rebroadcast of the conference call will be available beginning at 4:00 p.m. ET on April 23, 2021 until May 4, 2021 by dialing 1-855-859-2056 and using Conference ID #4169716.

About WSFS Financial Corporation

WSFS Financial Corporation is a multi-billion dollar financial services company. Its primary subsidiary, WSFS Bank, is the oldest and largest locally-managed bank and trust company headquartered in Delaware and the Greater Philadelphia region. As of March 31, 2021, WSFS Financial Corporation had $14.7 billion in assets on its balance sheet and $24.7 billion in assets under management and administration. WSFS operates from 111 offices, 88 of which are banking offices, located in Pennsylvania (51), Delaware (42), New Jersey (16), Virginia (1) and Nevada (1) and provides comprehensive financial services including commercial banking, retail banking, cash management and trust and wealth management. Other subsidiaries or divisions include Arrow Land Transfer, Cash Connect®, Cypress Capital Management, LLC (Cypress), Christiana Trust Company of Delaware®, NewLane Finance®, Powdermill® Financial Solutions, West Capital Management®, WSFS Institutional Services®, WSFS Mortgage®, and WSFS Wealth® Investments. Serving the Greater Delaware Valley since 1832, WSFS Bank is one of the ten oldest banks in the United States continuously operating under the same name. For more information, please visit www.wsfsbank.com.

Forward-Looking Statement Disclaimer
This press release contains estimates, predictions, opinions, projections and other "forward-looking statements" as that phrase is defined in the Private Securities Litigation Reform Act of 1995. Such statements include, without limitation, references to the Company's predictions or expectations of future business or financial performance as well as its goals and objectives for future operations, financial and business trends, business prospects, and management's outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality or other future financial or business performance, strategies or expectations. The words “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project” and similar expressions, among others, generally identify forward-looking statements. Such forward-looking statements are based on various assumptions (some of which may be beyond the Company's control) and are subject to risks and uncertainties (which change over time) and other factors which could cause actual results to differ materially from those currently anticipated. Such risks and uncertainties include, but are not limited to, difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the markets in which the Company operates and in which its loans are concentrated, including possible declines in housing markets, an increase in unemployment levels and slowdowns in economic growth, including as a result of the novel coronavirus ("COVID-19") pandemic; possible additional loan losses and impairment of the collectability of loans, particularly as a result of the COVID-19 pandemic and the policies and programs implemented by the CARES Act including its automatic loan forbearance provisions and our PPP lending activities; additional credit, fraud and litigation risks associated with our PPP lending activities; economic and financial impact of federal, state and local emergency orders and other actions taken in response to the COVID-19 pandemic; the continuation of these conditions related to the COVID-19 pandemic, including whether due to a resurgence or additional waves of COVID-19 infections, particularly as the geographic areas in which we operate continue to re-open, and how quickly and to what extent normal economic and operating conditions can resume, especially as a vaccine becomes widely available; the Company's level of nonperforming assets and the costs associated with resolving problem loans including litigation and other costs and complying with government-imposed foreclosure moratoriums; changes in market interest rates which may increase funding costs and reduce earning asset yields and thus reduce margin; the impact of changes in interest rates and the credit quality and strength of underlying collateral and the effect of such changes on the market value of the Company's investment securities portfolio; the credit risk associated with the substantial amount of commercial real estate, construction and land development, and commercial and industrial loans in the Company's loan portfolio; the extensive federal and state regulation, supervision and examination governing almost every aspect of the Company's operations and potential expenses associated with complying with such regulations; the Company's ability to comply with applicable capital and liquidity requirements (including the effect of the transition to the Current Expected Credit Losses (CECL) methodology for allowances and related adjustments), including its ability to generate liquidity internally or raise capital on favorable terms; possible changes in trade, monetary and fiscal policies and stimulus programs, laws and regulations and other activities of governments, agencies, and similar organizations, and the uncertainty of the short- and long-term impacts of such changes; any impairments of the Company's goodwill or other intangible assets; conditions in the financial markets, including the destabilized economic environment caused by the COVID-19 pandemic, that may limit the Company's access to additional funding to meet its liquidity needs; the intention of the United Kingdom's Financial Conduct Authority (FCA) to cease support of London Inter-Bank Offered Rate (LIBOR) and the transition to an alternative reference interest rate, such as the Secured Overnight Funding Rate (SOFR), including methodologies for calculating the rate that are different from the LIBOR methodology and changed language for existing and new floating or adjustable rate contracts; the success of the Company's growth plans, including its plans to grow the commercial small business leasing portfolio and residential mortgage small business and Small Business Administration portfolios; the Company's ability to successfully integrate and fully realize the cost savings and other benefits of its acquisitions, manage risks related to business disruption following those acquisitions, and post-acquisition Customer acceptance of the Company's products and services and related Customer disintermediation, including its pending acquisition of Bryn Mawr; the Company’s ability to complete the acquisition of Bryn Mawr on the terms proposed, which are subject to a number of conditions, risks and uncertainties, including the possibility that the proposed acquisition does not close when expected or at all because all conditions to closing are not received or satisfied on a timely basis or at all, the failure to close for any other reason, diversion of management time on merger-related issues, risks relating to the potential dilutive effect of shares of the Company’s common stock to be issued in the acquisition of Bryn Mawr, and the reaction to the acquisition of Bryn Mawr of the companies’ customers, employees and counterparties; negative perceptions or publicity with respect to the Company generally and, in particular, the Company's trust and wealth management business; failure of the financial and operational controls of the Company's Cash Connect® division; adverse judgments or other resolution of pending and future legal proceedings, and cost incurred in defending such proceedings; the Company's reliance on third parties for certain important functions, including the operation of its core systems, and any failures by such third parties; system failures or cybersecurity incidents or other breaches of the Company's network security, particularly given widespread remote working arrangements; the Company's ability to recruit and retain key Associates; the effects of problems encountered by other financial institutions that adversely affect the Company or the banking industry generally; the effects of weather and natural disasters such as floods, droughts, wind, tornadoes and hurricanes as well as effects from geopolitical instability, public health crises and man-made disasters including terrorist attacks; the effects of regional or national civil unrest (including any resulting branch or ATM closures or damage); possible changes in the speed of loan prepayments by the Company's Customers and loan origination or sales volumes; possible changes in the speed of prepayments of mortgage-backed securities due to changes in the interest rate environment, particularly as a result of the COVID-19 pandemic, and the related acceleration of premium amortization on prepayments in the event that prepayments accelerate; regulatory limits on the Company's ability to receive dividends from its subsidiaries and pay dividends to its stockholders; any reputation, credit, interest rate, market, operational, litigation, legal, liquidity, regulatory and compliance risk resulting from developments related to any of the risks discussed above; and other risks and uncertainties, including those discussed in the Company's Form 10-K for the year ended December 31, 2020 and other documents filed by the Company with the Securities and Exchange Commission from time to time.

We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date on which they are made, and the Company disclaims any duty to revise or update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company for any reason, except as specifically required by law. As used in this press release, the terms "WSFS," "the Company," "registrant," "we," "us," and "our" mean WSFS Financial Corporation and its subsidiaries, on a consolidated basis, unless the context indicates otherwise.

 

WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS
SUMMARY STATEMENTS OF INCOME (Unaudited)

    Three months ended  
(Dollars in thousands, except per share data) March 31, 2021 December 31, 2020 March 31, 2020
Interest income:            
Interest and fees on loans $108,852  $118,737  $119,202 
Interest on mortgage-backed securities 10,704  10,923  13,219 
Interest and dividends on investment securities 1,449  1,419  926 
Other interest income 276  218  508 
  121,281  131,297  133,855 
Interest expense:      
Interest on deposits 4,496  6,447  14,637 
Interest on Federal Home Loan Bank advances 5  50  830 
Interest on senior debt 2,266  1,460  1,179 
Interest on trust preferred borrowings 324  334  586 
Interest on other borrowings 5  5  473 
  7,096  8,296  17,705 
Net interest income 114,185  123,001  116,150 
(Recovery of) provision for credit losses (20,160)  (936 56,646 
Net interest income after (recovery of) provision for credit losses 134,345  123,937  59,504 
Noninterest income:      
Credit/debit card and ATM income 6,805  7,098  11,359 
Investment management and fiduciary revenue 14,253  13,822  10,962 
Deposit service charges 5,460  5,405  5,647 
Mortgage banking activities, net 8,600  6,729  3,471 
Loan and lease fee income 3,485  1,137  1,119 
Securities gains, net 329  3,153  693 
Unrealized gain on equity investment, net     668 
Bank-owned life insurance income 205  269  (25
Other income 8,685  9,019  6,953 
  47,822  46,632  40,847 
Noninterest expense:      
Salaries, benefits and other compensation 53,138  51,442  45,346 
Occupancy expense 8,460  7,991  7,666 
Equipment expense 7,391  7,392  4,964 
Data processing and operations expense 3,385  3,263  3,078 
Professional fees 3,856  5,123  4,600 
Marketing expense 992  2,060  951 
FDIC expenses 1,069  1,068  (54
Loan workout and other credit costs 1,120  437  453 
Corporate development expense 2,095  (242 1,341 
Restructuring expense (265)  510   
Other operating expenses 14,378  14,329  20,151 
  95,619  93,373  88,496 
Income before taxes 86,548  77,196  11,855 
Income tax provision 21,407  17,455  1,288 
Net income $65,141  $59,741  $10,567 
Less: Net income (loss) attributable to noncontrolling interest 59  (72 (360
Net income attributable to WSFS $65,082  $59,813  $10,927 
Diluted earnings per share of common stock: $1.36  $1.20  $0.21 
Weighted average shares of common stock outstanding for fully diluted EPS 47,792,108  49,707,973  51,164,224 


See “Notes”


WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS
SUMMARY STATEMENTS OF INCOME (Unaudited) - continued

    Three months ended  
  March 31, 2021 December 31, 2020 March 31, 2020
Performance Ratios:      
Return on average assets (a) 1.85% 1.73% 0.36%
Return on average equity (a) 14.90  13.00  2.39 
Return on average tangible common equity (a)(o) 22.38  19.37  4.13 
Net interest margin (a)(b) 3.59  3.93  4.38 
Efficiency ratio (c) 58.93  54.95  56.27 
Noninterest income as a percentage of total net revenue (b) 29.47  27.45  25.97 


See “Notes”


WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS (Continued)
SUMMARY STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(Dollars in thousands) March 31, 2021 December 31, 2020 March 31, 2020
Assets:      
Cash and due from banks $1,628,773  $1,244,705  $182,125 
Cash in non-owned ATMs 428,180  402,339  322,844 
Investment securities, available-for-sale (d) 2,987,885  2,529,057  2,048,400 
Investment securities, held-to-maturity 103,523  111,741  134,047 
Other investments 22,941  23,003  104,843 
Net loans and leases (e)(f)(l) 8,529,213  8,993,476  8,497,147 
Bank owned life insurance 32,255  32,051  30,093 
Goodwill and intangibles 554,701  557,386  565,763 
Other assets 442,981  440,156  393,628 
Total assets $14,730,452  $14,333,914  $12,278,890 
Liabilities and Stockholders’ Equity:      
Noninterest-bearing deposits $3,857,610  $3,415,021  $2,314,982 
Interest-bearing deposits 8,361,189  8,223,356  7,109,396 
Total customer deposits 12,218,799  11,638,377  9,424,378 
Brokered deposits 64,901  218,287  284,976 
Total deposits 12,283,700  11,856,664  9,709,354 
Federal Home Loan Bank advances   6,623  119,971 
Other borrowings 335,201  334,018  281,314 
Other liabilities 343,097  347,129  334,832 
Total liabilities 12,961,998  12,544,434  10,445,471 
Stockholders’ equity of WSFS 1,770,641  1,791,726  1,834,594 
Noncontrolling interest (2,187)  (2,246 (1,175
Total stockholders' equity 1,768,454  1,789,480  1,833,419 
Total liabilities and stockholders' equity $14,730,452  $14,333,914  $12,278,890 
Capital Ratios:      
Equity to asset ratio 12.02% 12.50% 14.94%
Tangible common equity to tangible asset ratio (o) 8.58  8.96  10.83 
Common equity Tier 1 capital (required: 4.5%; well capitalized: 6.5%) (g) 13.20  12.50  13.41 
Tier 1 leverage (required: 4.00%; well-capitalized: 5.00%) (g) 9.82  9.74  11.85 
Tier 1 risk-based capital (required: 6.00%; well-capitalized: 8.00%) (g) 13.20  12.50  13.41 
Total risk-based capital (required: 8.00%; well-capitalized: 10.00%) (g) 14.46  13.76  14.53 
Asset Quality Indicators:      
Nonperforming assets:      
Nonaccruing loans $31,792  $41,908  $19,250 
Troubled debt restructuring (accruing) 15,684  15,539  14,070 
Assets acquired through foreclosure 2,068  3,061  4,825 
Total nonperforming assets $49,544  $60,508  $38,145 
Past due loans (h) $7,678  $16,694  $14,282 
Allowance for credit losses 204,823  228,810  139,081 
Ratio of nonperforming assets to total assets 0.34% 0.42% 0.31%
Ratio of nonperforming assets (excluding accruing TDRs) to total assets 0.23  0.31  0.20 
Ratio of allowance for credit losses to total loans and leases (q) 2.36  2.51  1.60 
Ratio of allowance for credit losses to nonaccruing loans 644  546  722 
Ratio of quarterly net charge-offs to average gross loans (a)(e)(i)(n) 0.18  0.13  0.04 
Ratio of year-to-date net charge-offs to average gross loans (a)(e)(i)(n) 0.18  0.09  0.04 


See “Notes”


WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS (Continued) 
AVERAGE BALANCE SHEET (Unaudited)

(Dollars in thousands) Three months ended
  March 31, 2021 December 31, 2020 March 31, 2020
  Average
Balance
 Interest &
Dividends
 Yield/
Rate
(a)(b)
 Average
Balance
 Interest &
Dividends
 Yield/
Rate
(a)(b)
 Average
Balance
 Interest &
Dividends
 Yield/
Rate
(a)(b)
Assets:
Interest-earning assets:
Loans: (e) (j)                  
Commercial loans and leases (p) $4,138,034  $52,620  5.16% $4,394,992  $59,758  5.42% $3,533,626  $55,693  6.35%
Commercial real estate loans (s) 2,803,378  29,191  4.22  2,812,685  30,071  4.25  2,808,867  34,292  4.91 
Residential mortgage 734,593  12,864  7.00  823,305  14,049  6.83  992,408  13,541  5.46 
Consumer loans 1,159,588  12,836  4.49  1,169,238  13,578  4.62  1,130,223  14,935  5.31 
Loans held for sale 161,287  1,341  3.37  152,138  1,281  3.35  69,884  741  4.26 
Total loans and leases 8,996,880  108,852  4.91  9,352,358  118,737  5.05  8,535,008  119,202  5.62 
Mortgage-backed securities (d) 2,507,910  10,704  1.71  2,167,521  10,923  2.02  1,959,637  13,219  2.70 
Investment securities (d) 336,410  1,449  1.98  324,679  1,419  1.98  131,121  926  3.40 
Other interest-earning assets 1,103,632  276  0.10  644,785  218  0.13  76,356  508  2.68 
Total interest-earning assets 12,944,832  $121,281  3.81% 12,489,343  $131,297  4.19% 10,702,122  $133,855  5.04%
Allowance for credit losses (226,911)      (232,053     (85,055    
Cash and due from banks 114,725      93,968      139,836     
Cash in non-owned ATMs 393,964      365,738      335,434     
Bank owned life insurance 32,155      31,829      30,154     
Other noninterest-earning assets 997,444      1,004,075      1,037,033     
Total assets $14,256,209      $13,752,900      $12,159,524     
Liabilities and stockholders’ equity:                  
Interest-bearing liabilities:                  
Interest-bearing deposits:                  
Interest-bearing demand $2,572,325  $618  0.10% $2,543,711  $660  0.10% $2,085,229  $1,897  0.37%
Savings 1,830,781  150  0.03  1,750,313  275  0.06  1,574,215  1,744  0.45 
Money market 2,682,219  854  0.13  2,474,582  1,218  0.20  2,152,986  4,090  0.76 
Customer time deposits 1,117,191  2,377  0.86  1,206,576  3,688  1.22  1,305,432  5,655  1.74 
Total interest-bearing customer deposits 8,202,516  3,999  0.20  7,975,182  5,841  0.29  7,117,862  13,386  0.76 
Brokered deposits 136,957  497  1.47  226,028  606  1.07  230,423  1,251  2.18 
Total interest-bearing deposits 8,339,473  4,496  0.22  8,201,210  6,447  0.31  7,348,285  14,637  0.80 
Federal Home Loan Bank advances 736  5  2.76  7,944  50  2.50  170,058  830  1.96 
Trust preferred borrowings 67,011  324  1.96  67,011  334  1.98  67,011  586  3.52 
Senior debt 246,654  2,266  3.67  137,428  1,460  4.25  98,627  1,179  4.78 
Other borrowed funds 19,656  5  0.10  22,133  5  0.09  148,256  473  1.28 
Total interest-bearing liabilities 8,673,530  $7,096  0.33% 8,435,726  $8,296  0.39% 7,832,237  $17,705  0.91%
Noninterest-bearing demand deposits 3,490,831      3,159,783      2,166,510     
Other noninterest-bearing liabilities 322,296      329,373      326,185     
Stockholders’ equity of WSFS 1,771,822      1,830,244      1,835,501     
Noncontrolling interest (2,270)      (2,226     (909    
Total liabilities and equity $14,256,209      $13,752,900      $12,159,524     
Excess of interest-earning assets over interest-bearing liabilities $4,271,302      $4,053,617      $2,869,885     
Net interest and dividend income   $114,185      $123,001      $116,150   
Interest rate spread     3.48%     3.80%     4.13%
Net interest margin     3.59%     3.93%     4.38%

See “Notes”


WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS (Continued)
(Unaudited)

(Dollars in thousands, except per share data)   Three months ended  
Stock Information: March 31, 2021 December 31, 2020 March 31, 2020
Market price of common stock:      
High $55.18 $45.48 $44.70
Low 40.64 26.48 17.84
Close 49.79 44.88 24.92
Book value per share of common stock 37.27 37.52 36.23
Tangible common book value per share of common stock (o) 25.60 25.85 25.06
Number of shares of common stock outstanding (000s) 47,502 47,756 50,633
Other Financial Data:      
One-year repricing gap to total assets (k) 13.26% 13.07% 2.38%
Weighted average duration of the MBS portfolio 5.0 years 2.7 years 2.2 years
Unrealized (losses) gains on securities available for sale, net of taxes $(9,957) $59,882 $72,436
Number of Associates (FTEs) (m) 1,854 1,838 1,791
Number of offices (branches, LPO’s, operations centers, etc.) 111 112 116
Number of WSFS owned and branded ATMs 625 626 470


Notes:
(a)Annualized.
(b)Computed on a fully tax-equivalent basis.
(c)Noninterest expense divided by (tax-equivalent) net interest income and noninterest income.
(d)Includes securities held-to-maturity (at amortized cost) and securities available-for-sale (at fair value).
(e)Net of unearned income.
(f)Net of allowance for credit losses.
(g)Represents capital ratios of Wilmington Savings Fund Society, FSB and subsidiaries.
(h)Accruing loans which are contractually past due 90 days or more as to principal or interest. Balance includes student loans acquired from Beneficial, which are U.S. government guaranteed with little risk of credit loss.
(i)Excludes loans held for sale.
(j)Nonperforming loans are included in average balance computations.
(k)The difference between projected amounts of interest-sensitive assets and interest-sensitive liabilities repricing within one year divided by total assets, based on a current interest rate scenario.
(l)Includes loans held for sale and reverse mortgages.
(m)Includes seasonal Associates, when applicable.
(n)Excludes reverse mortgage loans.
(o)The Company uses non-GAAP (United States Generally Accepted Accounting Principles) financial information in its analysis of the Company’s performance. The Company’s management believes that these non-GAAP financial measures provide a greater understanding of ongoing operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented. The Company’s management believes that investors may use these non-GAAP financial measures to analyze the Company’s financial performance without the impact of unusual items or events that may obscure trends in the Company’s underlying performance. This non-GAAP data should be considered in addition to results prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP results. For a reconciliation of these and other non-GAAP financial measures to their comparable GAAP measures, see "Non-GAAP Reconciliation" at the end of the press release.
(p)Includes commercial & industrial loans, PPP loans and commercial small business leases.
(q)Represents amortized cost basis for loans, leases and held-to-maturity securities.
(r)Includes (recovery of) provision for credit losses, loan workout expenses, OREO expenses and other credit costs.
(s)Includes commercial mortgage and commercial construction loans.

 

WSFS FINANCIAL CORPORATION 
FINANCIAL HIGHLIGHTS (Continued)
(Dollars in thousands, except per share data)
(Unaudited)

Non-GAAP Reconciliation (o): Three months ended
  March 31, 2021 December 31, 2020 March 31, 2020
Net interest income (GAAP) $114,185  $123,001  $116,150 
Core net interest income (non-GAAP) $114,185  $123,001  $116,150 
Noninterest income (GAAP) $47,822  $46,632  $40,847 
Less: Securities gains 329  3,153  693 
Less: Unrealized gains on equity investments, net     668 
Core fee revenue (non-GAAP) $47,493  $43,479  $39,486 
Core net revenue (non-GAAP) $161,678  $166,480  $155,636 
Core net revenue (non-GAAP)(tax-equivalent) $161,943  $166,756  $155,905 
Noninterest expense (GAAP) $95,619  $93,373  $88,496 
Less/(plus): Corporate development expense 2,095  (242 1,341 
(Plus)/less: Restructuring expense (265)  510   
Less: Contribution to WSFS Community Foundation     3,000 
Core noninterest expense (non-GAAP) $93,789  $93,105  $84,155 
Core efficiency ratio (non-GAAP) 57.9% 55.8% 54.0%
       
       
  End of period
  March 31, 2021 December 31, 2020 March 31, 2020
Total assets (GAAP) $14,730,452  $14,333,914  $12,278,890 
Less: Goodwill and other intangible assets 554,701  557,386  565,763 
Total tangible assets (non-GAAP) $14,175,751  $13,776,528  $11,713,127 
Total stockholders’ equity of WSFS (GAAP) $1,770,641  $1,791,726  $1,834,594 
Less: Goodwill and other intangible assets 554,701  557,386  565,763 
Total tangible common equity (non-GAAP) $1,215,940  $1,234,340  $1,268,831 
       
Calculation of tangible common book value per share:    
Book value per share (GAAP) $37.27  $37.52  $36.23 
Tangible common book value per share (non-GAAP) 25.60  25.85  25.06 
Calculation of tangible common equity to tangible assets:    
Equity to asset ratio (GAAP) 12.02% 12.50% 14.94%
Tangible common equity to tangible assets ratio (non-GAAP) 8.58  8.96  10.83 

 

Non-GAAP Reconciliation - continued (o): Three months ended
  March 31, 2021 December 31, 2020 March 31, 2020
GAAP net income attributable to WSFS $65,082  $59,813  $10,927 
Plus/(less): Pre-tax adjustments: Securities gains, unrealized gains on equity investments, corporate development and restructuring expense, and contribution to WSFS Community Foundation 1,501  (2,885 2,980 
(Plus)/less: Tax impact of pre-tax adjustments 11  687  (2,020
Adjusted net income (non-GAAP) attributable to WSFS $66,594  $57,615  $11,887 
       
GAAP return on average assets (ROA) 1.85% 1.73% 0.36%
Plus/(less): Pre-tax adjustments: Securities gains, unrealized gains on equity investments, corporate development and restructuring expense, and contribution to WSFS Community Foundation 0.04  (0.08 0.10 
(Plus)/less: Tax impact of pre-tax adjustments   0.02  (0.07
Core ROA (non-GAAP) 1.89% 1.67% 0.39%
       
Earnings per share (GAAP) $1.36  $1.20  $0.21 
Plus/(less): Pre-tax adjustments: Securities gains, unrealized gains on equity investments, corporate development and restructuring expense, and contribution to WSFS Community Foundation 0.03  (0.06)  0.06 
(Plus)/less: Tax impact of pre-tax adjustments   0.02  (0.04
Core earnings per share (non-GAAP) $1.39  $1.16  $0.23 
       
Calculation of return on average tangible common equity:    
GAAP net income attributable to WSFS $65,082  $59,813  $10,927 
Plus: Tax effected amortization of intangible assets 2,004  2,090  2,103 
Net tangible income (non-GAAP) $67,086  $61,903  $13,030 
Average stockholders’ equity of WSFS $1,771,822  $1,830,244  $1,835,501 
Less: average goodwill and intangible assets 556,344  558,750  567,695 
Net average tangible common equity $1,215,478  $1,271,494  $1,267,806 
Return on average tangible common equity (non-GAAP) 22.38% 19.37% 4.13%
       



  Three months ended 
  March 31, 2021 December 31, 2020  March 31, 2020 
Calculation of PPNR:
Net income (GAAP) $65,141  $59,741  $10,567 
Plus: Income tax provision 21,407  17,455  1,288 
Plus/(less): (Recovery of) provision for credit losses (20,160) (936) 56,646 
PPNR (non-GAAP) $66,388  $76,260  $68,501 
          

 

Investor Relations Contact: Dominic C. Canuso
(302) 571-6833; dcanuso@wsfsbank.com
Media Contact: Rebecca Acevedo
(215) 253-5566; racevedo@wsfsbank.com


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