WSFS Reports 3Q 2024 ROA of 1.22% and EPS of $1.08; Results Reflect Continued Loan, Deposit, and Fee Revenue Growth

WSFS Financial Corporation (Nasdaq: WSFS), the parent company of WSFS Bank, today announced its financial results for the third quarter of 2024.

Selected financial results and metrics are as follows:

GAAP results for the quarterly periods shown included items that are excluded from core results. Below is a summary of the financial effects of these items. For additional detail, refer to the Non-GAAP reconciliation in the back of this earnings release.

CEO Commentary

Rodger Levenson, Chairman, CEO and President, said, "WSFS performed very well in the third quarter as reflected in our operating results of a core ROA(2) of 1.22% and accompanying core EPS(2) of $1.08.

“Despite muted demand, our results were highlighted by annualized loan growth of 5% driven by our commercial, consumer, and residential mortgage portfolios. In addition, deposits grew 3% on an annualized basis primarily due to seasonal municipal deposit inflows.

“Our diverse fee businesses also continued to perform solidly. During the quarter, we completed the conversions of our trust accounting system and client portal in our Wealth Management business. These conversions were executed as part of our Bryn Mawr Trust integration plan and position us for significant future growth.

“Total net credit costs increased modestly compared to the prior quarter with a decrease in the provision for credit losses offset by an increase in reserves for unfunded loan commitments. The negative migration in credit metrics includes two existing problem commercial loans (office-related and hotel) which moved to nonperforming assets in the quarter.

“While the 50 basis point decrease in the Fed Funds Rate in mid-September had a minimal impact on 3Q results, we have updated our full year 2024 Outlook in our Earnings Release Supplement to reflect this change.

“We look forward to finishing 2024 strong and as always I want to extend my sincere thanks to our 2,300 Associates who work tirelessly to serve our Customers, Communities and each other every day.”

Highlights for 3Q 2024:

• Core ROA was 1.22%, compared to 1.25% for 2Q 2024.

• Core EPS was $1.08, flat from 2Q 2024.

• Gross loan growth of 1% (5% annualized) from 2Q 2024 driven by growth in commercial, consumer, and residential mortgage.

• Customer deposits increased 1% (3% annualized) compared to 2Q 2024, driven by seasonal increases in municipal deposits and continued increases in customer time deposits, partially offset by expected outflows in Wealth and Trust deposits.

• Net interest margin of 3.78%, compared to 3.85% for 2Q 2024, reflects higher deposit costs and slightly lower asset yields.

• Core fee revenue (noninterest income)(3) of $90.1 million, increased $4.1 million, or 5% (not annualized), compared to 2Q 2024, driven by revenue from our partnership with Spring EQ and growth in Cash Connect®.

• Total net credit costs were $20.1 million, compared to $18.5 million for 2Q 2024. Provision for credit losses was $18.4 million, a decline of $1.4 million from the prior quarter, which was offset by increases in loan workout costs and reserves for unfunded commitments.

• WSFS repurchased 266,672 shares of common stock at an average price of $51.82 per share, totaling an aggregate of $13.8 million. Tangible common book value (TBV) per share(3) increased by $3.36 to $28.56. The Board of Directors approved a quarterly cash dividend of $0.15 per share.

Third Quarter 2024 Discussion of Financial Results

Balance Sheet

The following table summarizes loan and lease balances and composition at September 30, 2024 compared to June 30, 2024 and September 30, 2023:

At September 30, 2024, WSFS’ gross loan and lease portfolio increased $165.5 million, or 1% (5% annualized), when compared with June 30, 2024, driven by growth in commercial, consumer, and residential mortgages. Total commercial loans and leases increased $104.6 million, with growth from new originations and the conversion of construction loans, which drove increases in the C&I and commercial mortgage portfolios.

Consumer loans increased $31.6 million, primarily from Spring EQ home equity loans, partially offset by a decrease in Upstart loans. We met the 2024 origination target with Spring EQ and do not expect additional originations in the fourth quarter. As a result of the previously announced sale of Spring EQ, we are evaluating volumes for 2025. Residential mortgages increased $29.2 million due to the retention of certain loans based on favorable yields and relationship opportunities.

Gross loans and leases at September 30, 2024 increased $649.2 million, or 5%, when compared with September 30, 2023. The growth was driven by increases of $503.3 million in commercial mortgage, $181.0 million in consumer loans (primarily from Spring EQ), $91.9 million in residential mortgage due to the reasons noted above, and $71.0 million in C&I. These increases were partially offset by a $237.7 million decrease in construction loans, as they migrated into commercial mortgages and C&I loans, including owner-occupied real estate.

The following table summarizes customer deposit balances and composition at September 30, 2024 compared to June 30, 2024 and September 30, 2023:

Total customer deposits increased by $136.0 million, 1% (3% annualized), when compared with June 30, 2024, primarily driven by seasonal increases in municipal deposits of $227.7 million and continued increases in customer time deposits, partially offset by expected outflows in Wealth and Trust deposits. Average customer deposits increased 1% (5% annualized), including 12% (annualized) in noninterest demand, compared to June 30, 2024, primarily from Wealth and Trust flows.

Total customer deposits increased by $529.8 million, or 3%, from September 30, 2023, primarily due to increases in money market and time deposits. The growth was concentrated in the Commercial and Consumer businesses.

The deposit base remains well-diversified, with 51% of customer deposits coming from the Commercial, Small Business, and Wealth and Trust business lines. The loan-to-deposit ratio(4) was 80% at September 30, 2024, providing continued capacity to fund future loan growth.

Core deposits were 87% of total customer deposits, with a weighted average cost of 159bps for the quarter. Small mix changes continued this quarter with no- and low-cost checking accounts representing 47% of total customer deposits with a weighted average cost of 46bps for the quarter.

Net Interest Income

Net interest income increased $3.1 million, or 2% (not annualized), compared to 2Q 2024, primarily due to loan growth. Net interest income decreased $5.1 million, or 3%, compared to 3Q 2023, primarily driven by continued deposit mix shift and growth in higher yielding deposit products.

Total loan yields were 7.07%, a decrease of 2bps when compared to 2Q 2024. Total customer deposit costs were 1.95%, an increase of 6bps, while interest-bearing customer deposit costs were 2.79%, an increase of 10bps compared to the prior quarter. The deposit cost increase was driven by growth in higher-priced deposits as we saw opportunities to deepen existing relationships and attract new business.

Net interest margin decreased 7bps from 2Q 2024, mainly due to growth in municipal and higher priced deposits as described above (3bps), as well as slightly lower asset yields, which were partially driven by market-value increases on available-for-sale investment securities (2bps). Net interest margin decreased 30bps from 3Q 2023, primarily driven by continued deposit mix shift and growth in higher priced deposit products over the past year.

To mitigate asset sensitivity, WSFS completed a previously announced $1.5 billion hedging program utilizing floor options.

Asset Quality

The following table summarizes asset quality metrics as of and for the period ended September 30, 2024 compared to June 30, 2024 and September 30, 2023.

Total net credit costs were $20.1 million in the quarter, an increase of $1.6 million, compared to $18.5 million in 2Q 2024. Total net credit costs include a provision for credit losses of $18.4 million, which declined slightly from 2Q 2024. The increase in total net credit costs was due to higher reserves for unfunded commitments related to new loan commitments and the continued evaluation of the portfolio, as well as higher loan workout costs.

Nonperforming assets increased $25.9 million, or 12bps of total assets, compared to June 30, 2024, primarily driven by the migration of two loans - a $19.2 million C&I loan, in participation with another bank, to a fund that is invested in office properties predominantly in east coast suburban markets and a $14.7 million hotel loan in suburban Philadelphia, partially offset by the resolution of previously identified nonperforming assets.

Net charge-offs increased $5.0 million to $19.2 million, or 0.58% (annualized) of average gross loans during the quarter, mainly due to the previously identified hotel loan. Excluding Upstart and NewLane, which experienced losses consistent with the prior quarter, net charge-offs were 31bps of average gross loans.

Problem assets to total Tier 1 capital plus ACL ratio was 30.11%, an increase of 311bps compared to June 30, 2024, based on the continued evaluation of the portfolio.

Delinquencies of $147.6 million, or 111bps of gross loans, increased $58.6 million, or 43bps, compared to June 30, 2024. This increase was primarily driven by the previously mentioned hotel loan and one additional $42.1 million commercial real estate relationship in which we are working with the sponsor on a path toward resolution.

The ACL was $197.5 million as of September 30, 2024, a decrease of $0.8 million from June 30, 2024. The ACL coverage ratio was 1.48%, a decrease of 3bps from June 30, 2024. The decreases in the ACL and coverage ratio were due to continued runoff on the Upstart portfolio.

Core Fee Revenue

Fee businesses, including Wealth and Trust, Cash Connect®, Capital Markets, and Mortgage Banking reflect the investments we have made to diversify our revenue. Core fee revenue (noninterest income) of $90.1 million increased $4.1 million, or 5% (not annualized), compared to $86.0 million from 2Q 2024, primarily driven by $2.3 million of revenue from our partnership with Spring EQ (related to the annual earnout from the previously announced sale), $0.8 million from Cash Connect® due to increases in bailment and smart safe revenue, and $0.7 million from Bank Owned Life Insurance.

Core fee revenue increased $16.7 million, or 23%, compared to 3Q 2023. The growth was driven by the Cash Connect®, Wealth Management, Core Banking, and Mortgage business lines. Growth in Cash Connect® was driven bybailment Customers added in the fourth quarter of 2023 and the first half of 2024. Growth in Wealth Management was driven by growth across all key product lines, with double digit growth in Institutional Services and The Bryn Mawr Trust Company of Delaware (BMT of DE).

For 3Q 2024, our core fee revenue ratio(6) was 33.6% compared to 33.0% in 2Q 2024 and 28.6% in 3Q 2023. Fee revenue is a competitive differentiator providing a well-diversified source of revenue with further growth opportunities expected.

Core Noninterest Expense(7)

Core noninterest expense of $163.7 million increased $7.7 million, or 5% (not annualized), compared to 2Q 2024. The increase included $3.0 million related to changes in unfunded loan commitment reserves due to new loan commitments and the continued evaluation of the portfolio, as well as higher loan workout costs. In addition, salaries and benefits increased by $2.9 million due to increased performance-based incentive accruals and talent additions as we continue to invest in the franchise, as well as a $1.4 million increase in external fraud losses.

Core noninterest expense increased $24.1 million, or 17%, compared to 3Q 2023. The increase was primarily due to $11.7 million in higher salaries and benefits from annual and performance-based increases and talent additions in key business lines, as well as $8.5 million from Cash Connect® external funding costs. Excluding the Cash Connect® external funding costs (which were offset in revenue), expenses increased by 12% compared to 3Q 2023.

Our core efficiency ratio(7) was 61.1% in 3Q 2024, compared to 59.8% in 2Q 2024 and 54.4% in 3Q 2023.

Income Taxes

We recorded a $21.1 million income tax provision in 3Q 2024, compared to $21.3 million in 2Q 2024 and $22.9 million in 3Q 2023.

The effective tax rate was 24.7% in 3Q 2024 compared to 23.5% in 2Q 2024 and 23.6% in 3Q 2023. The increase in effective tax rate for 3Q 2024 compared to 2Q 2024 was primarily driven by higher state taxes along with higher solar tax credit investment benefits in the second quarter. The increase in effective tax rate when compared to 3Q 2023 is attributable to an increase in state taxes. On a year-to-date basis, the effective tax rate was 24.2% in 2024 compared to 24.6% for the same period in 2023.

Capital Management

Capital levels remain strong and are all substantially in excess of the “well-capitalized” regulatory benchmarks at September 30, 2024, with WSFS Bank’s Tier 1 leverage ratio of 10.68%, Common Equity Tier 1 capital ratio and Tier 1 capital ratio of 13.46%, and Total Risk-based capital ratio of 14.71%.

WSFS’ total stockholders’ equity increased $188.7 million, or 8% (not annualized), during 3Q 2024. The increase was primarily due to an increase in accumulated other comprehensive income (AOCI) of $142.9 million driven by market-value increases on available-for-sale investment securities, as well as quarterly earnings of $64.4 million. These increases were partially offset by capital returns of $22.7 million to stockholders, comprising $13.8 million from share repurchases and $8.9 million from quarterly dividends.

WSFS’ tangible common equity(8) increased $192.7 million, or 13% (not annualized), compared to June 30, 2024, primarily due to the reasons described above and scheduled amortization of intangibles. WSFS’ common equity to assets ratio increased 81bps to 12.81% during the quarter, and our tangible common equity to tangible assets ratio(8) was 8.47% at September 30, 2024, an increase of 91bps, compared to the prior quarter.

At September 30, 2024, book value per share was $45.37, an increase of $3.36, or 8% (not annualized), from June 30, 2024, and tangible book value per share was $28.56, an increase of $3.36, or 13% (not annualized), from June 30, 2024. These increases were due to the reasons described above.

During 3Q 2024, WSFS repurchased 266,672 shares of common stock for an aggregate of $13.8 million. As of September 30, 2024, WSFS has 3,685,092 shares, or approximately 6% of outstanding shares, remaining to repurchase under its current authorization. For the year, total capital returned to stockholders through share repurchases and quarterly dividends was $101.5 million.

The Board of Directors approved a quarterly cash dividend of $0.15 per share of common stock. This dividend will be paid on November 22, 2024 to stockholders of record as of November 8, 2024.

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, credit and deposit products to individual, corporate, and institutional Clients.

Selected quarterly performance results and metrics are as follows:

Wealth Management pre-tax income increased $1.9 million, or 7% (not annualized), compared to 2Q 2024. Net interest income increased $3.2 million, as average trust deposits were higher by $271.9 million compared to 2Q 2024. Fee revenue decreased $1.0 million from 2Q 2024, primarily due to lower seasonal tax-based revenue and nonrecurring items, partially offset by growth in Institutional Services fees. Total noninterest expense increased $0.3 million, compared to 2Q 2024, mostly due to salaries from hiring new advisors and performance-based compensation.

Wealth Management pre-tax income increased $0.5 million compared to 3Q 2023 due to higher fee revenue and net interest income. Net interest income increased $0.5 million due mostly to higher deposit balances. Fee revenue increased $4.0 million, or 12%, compared to 3Q 2023, due to increases in assignment and bankruptcy fees in Institutional Services, increased activity in The Bryn Mawr Trust Company of Delaware, and higher AUM in Private Wealth Management. Total noninterest expense increased $3.8 million driven by salary expenses from hiring new advisors and performance-based compensation.

Net AUM of $9.3 billion at the end of 3Q 2024 increased $0.3 billion, or 3% compared to 2Q 2024, and increased $1.2 billion, or 15%, compared to 3Q 2023. AUM balances over the period benefited primarily from positive returns in broader equity markets.

Cash Connect®

Cash Connect® is a premier provider of ATM vault cash, smart safe and cash logistics services in the United States, servicing non-bank ATMs and smart safes nationwide and supporting ATMs for WSFS Bank Customers with one of the largest branded ATM networks in our region.

Selected quarterly financial results and metrics are as follows:

Cash Connect® pre-tax income decreased $0.3 million to $1.6 million, due to an increase in non-earning cash (held in vaults) related to recently onboarded Clients and higher external funding costs, while net revenue was essentially flat. ROA decreased 43bps to 1.29%, compared to 1.72% in 2Q 2024, driven by lower net income (27bps) and a change in funding mix (16bps).

Pre-tax net income increased $0.5 million, or 50%, compared to 3Q 2023, primarily driven by an increase in bailment ATMs year over year. This increase in bailment units also drove a $9.7 million increase in net revenue and a $9.1 million increase in noninterest expense compared to 3Q 2023, as we continued to optimize newly onboarded customers. ROA increased 42bps compared to 3Q 2023 due to higher net income.

As we captured market share, total ATMs and smart safes increased by 8,243, or 24%, compared to 3Q 2023, primarily driven by an increase in bailment ATMs, partially offset by a decrease in lower margin reconciliation-only ATMs.

Third Quarter 2024 Earnings Release Conference Call

Management will conduct a conference call to review 3Q 2024 results at 1:00 p.m. Eastern Time (ET) on Friday, October 25, 2024. Interested parties may access the conference call live on our Investor Relations website (https://investors.wsfsbank.com). For those who cannot access the live conference call, a replay will be accessible shortly after the event concludes through our Investor Relations website.

About WSFS Financial Corporation

WSFS Financial Corporation is a multibillion-dollar financial services company. Its primary subsidiary, WSFS Bank, is the oldest and largest locally headquartered bank and trust company in the Greater Philadelphia and Delaware region. As of September 30, 2024, WSFS Financial Corporation had $20.9 billion in assets on its balance sheet and $87.2 billion in assets under management and administration. WSFS operates from 114 offices, 88 of which are banking offices, located in Pennsylvania (57), Delaware (39), New Jersey (14), Florida (2), Nevada (1) and Virginia (1) and provides comprehensive financial services including commercial banking, consumer banking, treasury management and trust and wealth management. Other subsidiaries or divisions include Arrow Land Transfer, Bryn Mawr Capital Management, LLC, Bryn Mawr Trust®, The Bryn Mawr Trust Company of Delaware, Cash Connect®, NewLane Finance®, Powdermill® Financial Solutions, 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 Statements

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 in financial markets, particularly in the markets in which the Company operates and in which its loans are concentrated, including difficult and unfavorable conditions and trends related to housing markets, costs of living, unemployment levels, interest rates, supply chain issues, inflation, and economic growth; the impacts related to or resulting from bank failures and other economic and industry volatility, including potential increased regulatory requirements and costs and potential impacts to macroeconomic conditions; 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, which could impact market confidence in the Company’s operations; possible additional loan losses and impairment of the collectability of loans; 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; , the credit risk associated with the substantial amount of commercial real estate, commercial and industrial, and construction and land development 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 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; the success of the Company's growth plans; failure of the financial and/or operational controls of the Company's Cash Connect® and/or Wealth Management segments; negative perceptions or publicity with respect to the Company generally and, in particular, the Company's trust and wealth management business; 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 remote working arrangements; the Company's ability to recruit and retain key Associates; the effects of weather, including climate change, and natural disasters such as floods, droughts, wind, tornadoes and hurricanes as well as effects from geopolitical instability, armed conflicts, 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 market valuations and/or the speed of prepayments of mortgage-backed securities (MBS) due to changes in the interest rate environment, 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; any compounding effects or unexpected interactions of the risks discussed above; and other risks and uncertainties, including those discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2024 and June 30, 2024, and other documents filed by the Company with the Securities and Exchange Commission from time to time.

The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. 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.