WSFS Reports 2Q 2024 ROA of 1.34% and EPS of $1.16; Results Reflect Loan, Deposit and Diversified Fee Revenue Growth, Net Interest Margin of 3.85%

WSFS Financial Corporation (NASDAQ:WSFS), the parent company of WSFS Bank, today announced its financial results for the second 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.

CEO Commentary

Rodger Levenson, Chairman, CEO and President, said, "We are pleased to report second quarter earnings of a core ROA⁽⁵⁾ of 1.25% and accompanying core EPS⁽⁵⁾ of $1.08. Our results were highlighted by quarterly core fee revenue⁽⁵⁾ growth of 13%, driven by strong performance in our Cash Connect^®, Wealth and Trust, Capital Markets, and Mortgage businesses. Solid annualized loan growth of 6% was driven primarily by our commercial and consumer lending portfolios while deposits increased 3% annualized and the net interest margin of 3.85% also increased slightly from the prior quarter. Our strong performance provides momentum as we head into the second half of 2024.

"Overall asset quality metrics remained stable and reflected the uneven economy. While we experienced improvement in both non-performing loans and delinquency levels, problem loans saw a modest increase to 4.76% of total gross loans. Net charge-offs of 44 basis points remained consistent with recent history.

"During the quarter, Moody's Investor Services reaffirmed their ratings of WSFS Financial Corporation with an investment-grade issuer rating of Baa2 with a Stable Outlook. The ratings affirmation reflects the benefits of our diversified business model, our strong capital levels, earnings, liquidity, and asset quality.

"On June 12^th, we held our second annual 'We Stand For Service Day', where nearly 1,500 of our Associates volunteered at more than 130 community organizations across the Greater Philadelphia, Southern New Jersey, and Delaware region. Additionally, we were honored to be named a 2024 honoree of The Civic 50 Greater Philadelphia by the Philadelphia Chamber of Commerce for the third year in a row. These community efforts are a testament of our over 2,200 Associates who live our mission of 'We Stand for Service' every day."

Highlights for 2Q 2024:

• Core EPS was $1.08 compared to $1.11 for 1Q 2024.

• Core ROA was 1.25% compared to 1.31% for 1Q 2024.

• Core PPNR as a percent of average assets⁽⁶⁾ of 2.02% was flat compared to 1Q 2024.

• Core fee revenue (noninterest income) of $86.0 million, an increase of $9.6 million, or 13% (not annualized), compared to 1Q 2024, driven by our Cash Connect^®, Wealth and Trust, Capital Markets, and Mortgage businesses.

• Gross loan growth of 1% (6% annualized) from 1Q 2024 primarily driven by growth in the commercial & industrial (C&I) and consumer portfolios.

• Customer deposits increased by 1% (3% annualized) compared to 1Q 2024, driven by increases in noninterest demand deposits from short-term Trust deposits.

• Net interest margin of 3.85% compared to 3.84% for 1Q 2024, reflects increasing loan yields mostly offset by higher deposit pricing.

• Total net credit costs were $18.5 million, compared to $16.2 million for 1Q 2024 due to a higher provision on the commercial mortgage (CRE) portfolio.

• WSFS repurchased 897,461 shares of common stock at an average price of $44.20 per share, totaling an aggregate of $39.7 million. Tangible common book value (TBV) per share⁽⁶⁾ increased by $0.68 to $25.20. The Board of Directors also approved a quarterly cash dividend of $0.15 per share.

Second Quarter 2024 Discussion of Financial Results

Balance Sheet

The following table summarizes loan and lease balances and composition at June 30, 2024 compared to March 31, 2024 and June 30, 2023:

At June 30, 2024, WSFS' gross loan and lease portfolio increased $189.2 million, or 1% (6% annualized), when compared with March 31, 2024 due to increases of $110.2 million in C&I, $47.9 million in residential mortgage due to the retention of certain loans based on favorable yields and relationship opportunities, and $40.6 million in consumer loans (primarily from Spring EQ home equity loans). The increase of $158.0 million in commercial mortgage and corresponding decrease of $177.1 million in construction loans was a result of a migration of construction loans to permanent commercial mortgages.

The C&I portfolio (including owner-occupied real estate) continued to be our largest portfolio at 35% of net loans and leases. Additionally, our total commercial loan and lease portfolio represents a majority of our lending portfolio at 78% of net loans and leases.

Gross loans and leases at June 30, 2024 increased $815.8 million, or 7%, when compared with June 30, 2023. The increase was driven by increases of $482.0 million in commercial mortgage, $201.2 million in consumer loans (primarily from Spring EQ), $89.2 million in residential mortgage, and $65.9 million in C&I.

The following table summarizes customer deposit balances and composition at June 30, 2024 compared to March 31, 2024 and June 30, 2023:

Total customer deposits increased by $103.9 million, or 1% (3% annualized), when compared with March 31, 2024, primarily due to increases in noninterest demand deposits from short-term Trust deposits and time deposits.

Customer deposits increased by $30.6 million from June 30, 2023, primarily due to transactional accounts, which drive notable inflows and outflows of deposits in our Wealth and Trust and Commercial businesses.

Our deposit base remains highly diverse, with more than half of our customer deposits, or 51%, coming from our Commercial, Small Business, and Wealth and Trust business lines. The loan-to-deposit ratio⁽⁷⁾ was 80% at June 30, 2024, reflecting continued capacity to fund future loan growth.

Core deposits were a strong 88% of total customer deposits. No- and low-cost checking accounts represented 46% of total customer deposits with a weighted average cost of 43bps for the quarter. While customer deposits continue to shift into Certificates of Deposits (CDs), these accounts represent only 12% of total customer deposits as of June 30, 2024.

Net Interest Income

Net interest income decreased $0.8 million, or less than 1% (not annualized), compared to 1Q 2024 primarily due to higher deposit pricing resulting from growth in high yield money markets and repricing of maturing CDs. Net interest income decreased $7.4 million, or 4%, compared to 2Q 2023, primarily driven by lagging increases in deposit pricing following rate hikes in 2023 and increased deposit costs due to the reasons noted above.

Total loan yields were 7.09%, an increase of 7bps when compared to 1Q 2024. Total customer deposit costs were 1.89%, an increase of 10bps, while customer interest-bearing deposit costs were 2.69%, an increase of 14bps compared to the prior quarter.

Net interest margin increased 1bp from 1Q 2024, due to increasing loan yields mostly offset by higher deposit pricing which resulted from growth in high yield money markets and repricing of maturing CDs. Net interest margin decreased 26bps from 2Q 2023, primarily due to lagging increases in deposit pricing following rate hikes in 2023 and a continued shift to higher yielding deposit products.

Asset Quality

The following table summarizes asset quality metrics as of and for the period ended June 30, 2024 compared to March 31, 2024 and June 30, 2023.

Overall asset quality remained stable compared to the previous quarter. Problem assets to total Tier 1 capital plus ACL ratio was 27.00%, an increase of 0.0358bps compared to March 31, 2024, primarily driven by the downgrades of three C&I loans totaling $56.6 million during the quarter.

Delinquencies of $89.0 million, or 68bps of gross loans, decreased $15.5 million, or 13bps, compared to March 31, 2024, due to the payoff of a $15.3 million CRE-multifamily relationship.

Nonperforming assets decreased $1.8 million, or 1bp of total assets, compared to March 31, 2024, primarily driven by favorable resolutions and paydowns of multiple loans, partially offset by the addition of a $17.3 million C&I relationship and a $4.3 million CRE-office relationship in the suburban Philadelphia market. Net charge-offs increased $5.6 million to $14.2 million, or 0.44% (annualized) of average gross loans during the quarter, primarily due to a charge-off on the CRE-office relationship mentioned above. Excluding Upstart and NewLane, net charge-offs were 17bps of average gross loans.

Total net credit costs were $18.5 million in the quarter compared to $16.2 million in 1Q 2024. The ACL was $198.3 million as of June 30, 2024, an increase of $5.6 million from March 31, 2024. The ACL coverage ratio was 1.51%, an increase of 3bps from March 31, 2024. The increases in net credit costs and ACL from the prior quarter were primarily due to higher provision on the CRE portfolio.

Core Fee Revenue

Fee businesses, including Wealth and Trust, Cash Connect^®, Capital Markets and Mortgage banking, continue to perform well and reflect the investments we have made to diversify our revenue. Core fee revenue (noninterest income) increased $9.6 million, or 13% (not annualized), compared to $86.0 million from 1Q 2024, primarily driven by increases of $4.7 million from Cash Connect^® and $4.7 million from Wealth and Trust. The increase from Cash Connect^® was due to growth from ATM customers added during 1Q and 2Q and one Customer moving to higher margin services during the quarter. The increase from Wealth and Trust was due to growth in Trust Services and seasonally-driven tax revenue in Private Wealth Management.

Core fee revenue increased $18.6 million, or 28%, compared to 2Q 2023. The increase was primarily due to the reasons noted above.

For 2Q 2024, our core fee revenue ratio⁽⁹⁾ was 33.0% compared to 30.3% in 1Q 2024 and 27.0% in 2Q 2023. Fee revenue is a competitive differentiator providing a well-diversified source of revenue with further growth opportunities expected across all sources.

Core Noninterest Expense⁽¹⁰⁾

Core noninterest expense of $156.0 million increased $8.4 million, or 6% (not annualized), compared to 1Q 2024. Excluding the one-time benefits of approximately $3.2 million to reflect lower incentive payments during 1Q 2024 and a $2.1 million increase in Cash Connect^® external funding costs, core noninterest expense increased by $3.1 million, or 2% (not annualized). The increase was primarily due to an increase of $1.9 million in Associate medical benefits as well as impacts from annual merit increases and other investments in our Associates.

Core noninterest expense increased $17.5 million, or 13%, compared to 2Q 2023. The increase was primarily due to $10.9 million in higher salaries and benefits from annual salary increases and talent additions and $8.9 million from Cash Connect^® external funding costs, partially offset by a decrease in professional fees.

Our core efficiency ratio⁽¹⁰⁾ was 59.8% in 2Q 2024, compared to 58.6% in 1Q 2024 and 55.5% in 2Q 2023.

Income Taxes

We recorded a $21.3 million income tax provision in 2Q 2024, compared to $21.2 million in 1Q 2024 and $23.0 million in 2Q 2023.

The effective tax rate was 23.5% in 2Q 2024 compared to 24.4% in 1Q 2024 and 25.1% in 2Q 2023. The decrease in effective tax rate for 2Q 2024 compared to 1Q 2024 was primarily driven by solar tax credit investments entered into during the quarter. The decrease in effective tax rate when compared to 2Q 2023 is due to the benefit from the solar and other tax credit investments and lower state income taxes.

Capital Management

Capital levels remain strong and are all substantially in excess of the "well-capitalized" regulatory benchmarks at June 30, 2024, with WSFS Bank's Tier 1 leverage ratio of 10.44%, Common Equity Tier 1 capital ratio and Tier 1 capital ratio of 13.07%, and Total Risk-based capital ratio of 14.32%.

WSFS' total stockholders' equity increased $16.1 million, or less than 1% (not annualized), during 2Q 2024. The increase was primarily due to quarterly earnings of $69.3 million and was partially offset by capital returns of $48.7 million to stockholders, comprising $39.7 million from share repurchases and $9.0 million from quarterly dividends, as well as a decrease in accumulated other comprehensive income (AOCI) of $6.0 million driven by market-value decreases on investment securities.

WSFS' tangible common equity⁽¹¹⁾ increased $20.3 million, or less than 1% (not annualized), compared to March 31, 2024, primarily due to the reasons described above and scheduled amortization of intangibles. WSFS' common equity to assets ratio was 12.00% and our tangible common equity to tangible assets ratio⁽¹¹⁾ was 7.56% at June 30, 2024, both essentially flat compared to the prior quarter.

At June 30, 2024, book value per share was $42.01, an increase of $0.84, or 2% (not annualized), from March 31, 2024, and TBV per share was $25.20, an increase of $0.68, or 3% (not annualized), from March 31, 2024.

During 2Q 2024, WSFS repurchased 897,461 shares of common stock for an aggregate of $39.7 million. As of June 30, 2024, WSFS has 3,951,764 shares, or approximately 7% 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 $78.7 million.

The Board of Directors approved a quarterly cash dividend of $0.15 per share of common stock. This dividend will be paid on August 23, 2024 to stockholders of record as of August 9, 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 $2.1 million, or 8% (not annualized), compared to 1Q 2024. Fee revenue increased $4.7 million from 1Q 2024, primarily due to account-based fees from new business and increases in assignment and bankruptcy fees in Institutional Services, increased activity in the Bryn Mawr Trust Company of Delaware and seasonal recognition of tax revenue in Private Wealth Management. Net interest income decreased $1.3 million, as average trust deposits were lower by $162.5 million compared to 1Q 2024. Total noninterest expense increased $1.7 million, compared to 1Q 2024 mostly due to our trust system conversion and certain volume-based charges.

Wealth Management pre-tax income decreased $1.9 million compared to 2Q 2023 due to higher expenses and lower net interest income. Fee revenue increased $5.3 million, or 16%, compared to 2Q 2023 due to account growth in Private Wealth Management, which includes market-based appreciation and expansion into the Rehoboth, DE market. Net interest income decreased $3.1 million due to higher funding costs. Total noninterest expense increased $3.7 million driven by salary expense, reflecting the growth in the business including the addition of the Rehoboth office.

Net AUM of $9.0 billion at the end of 2Q 2024 was essentially flat compared to 1Q 2024, and increased $0.9 billion, or 11%, compared to 2Q 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 increased $1.2 million to $2.0 million and ROA increased 89bps to 1.72%, compared to 0.83% in 1Q 2024, driven by growth from ATM customers added in 1Q and 2Q 2024 and one Customer moving to higher margin services during the quarter. Net revenue increased $3.5 million from 1Q 2024 driven by the same. Noninterest expense increased $2.2 million due to higher external funding costs associated with the increase in vault bailment units.

Net revenue increased $10.6 million and noninterest expense increased $9.6 million compared to 2Q 2023, primarily driven by an 84% increase in bailment units year over year. This also drove a pre-tax income increase of $1.0 million compared to 2Q 2023. ROA increased 100bps compared to 2Q 2023 due to higher net income and a higher proportion of external funding mix.

During 2Q 2024, Cash Connect^® saw improved financial metrics, a net decrease in overall units, and cash managed as a result of the Customer shift mentioned above.

Second Quarter 2024 Earnings Release Conference Call

Management will conduct a conference call to review 2Q 2024 results at 1:00 p.m. Eastern Time (ET) on Friday, July 26, 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 June 30, 2024, WSFS Financial Corporation had $20.7 billion in assets on its balance sheet and $84.9 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; 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; 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, Form 10-Q for the quarter ended March 31, 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.

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