WSFS Financial Corporation (Nasdaq: WSFS), the parent company of WSFS Bank, today announced its financial results for the second quarter of 2023.
Selected financial results and metrics are as follows:
(Dollars in millions, except per share data) | 2Q 2023 | 1Q 2023 | 2Q 2022 | |||||||||
Net interest income | $ | 181.8 | $ | 182.5 | $ | 153.6 | ||||||
Fee revenue | 66.9 | 63.1 | 72.0 | |||||||||
Total net revenue | 248.7 | 245.7 | 225.6 | |||||||||
Provision for credit losses | 15.8 | 29.0 | 8.3 | |||||||||
Noninterest expense | 141.3 | 133.0 | 134.0 | |||||||||
Net income attributable to WSFS | 68.7 | 62.4 | 60.7 | |||||||||
Pre-provision net revenue (PPNR)(1) | 107.5 | 112.6 | 91.6 | |||||||||
Earnings per share (EPS) (diluted) | 1.12 | 1.01 | 0.94 | |||||||||
Return on average assets (ROA) (a) | 1.36 | % | 1.27 | % | 1.17 | % | ||||||
Return on average equity (ROE) (a) | 11.8 | 11.2 | 10.1 | |||||||||
Fee revenue as % of total net revenue | 26.8 | 25.6 | 31.9 | |||||||||
Efficiency ratio | 56.7 | 54.0 | 59.3 | |||||||||
See “Notes” | ||||||||||||
GAAP results for the quarterly periods shown below included the following items that are excluded from core results.
2Q 2023 | 1Q 2023 | 2Q 2022 | ||||||||||||||||||||||
(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) | ||||||||||||||||||
Unrealized gain on equity investments, net | $ | — | $ | — | $ | — | $ | — | $ | 6.0 | $ | 0.07 | ||||||||||||
Visa derivative valuation adjustment(2) | 0.6 | 0.01 | 0.6 | 0.01 | — | — | ||||||||||||||||||
Corporate development and restructuring expense | 2.8 | 0.03 | — | — | 10.3 | 0.15 | ||||||||||||||||||
(1) As used in this press release, PPNR is a non-GAAP financial measure that adjusts net income determined in accordance with GAAP to exclude the impacts of (i) income tax provision and (ii) provision for credit losses. 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. |
(2) The Visa derivative valuation adjustment relates to our derivative liability established from the sale of 360,000 Visa Class B shares in 2Q 2020. The adjustment represents an expense to increase the liability and is included in Other income on the Summary Statements of Income. |
CEO Commentary
Rodger Levenson, Chairman, President and CEO, said, "We were pleased with our 2Q operating results which continued to reflect the strength and diversity of our business model. This included solid loan and deposit growth, a NIM of 4.11%, and strong performance across our major fee businesses.
"Our balance sheet remains strong with stable credit metrics, an ACL coverage ratio of 1.28%, significant liquidity capacity, and capital levels above well-capitalized, even when including the effective AOCI(3) from the total investment portfolio.
"WSFS continues to serve our Customers and Communities. On June 14th, we held our first-ever 'We Stand for Service Day', during which approximately 1,200 of our Associates provided nearly 5,000 hours of service to more than 80 nonprofit and community organizations across the Greater Philadelphia, Southern New Jersey and Delaware region.
"In addition, we were honored to be named a 2023 honoree of The Civic 50 Greater Philadelphia by the Philadelphia Foundation, in partnership with Points of Light and other local partners, for the second year in a row. This honor recognizes WSFS as one of the 50 most community-minded companies in Greater Philadelphia."
(3) As used in this press release, effective AOCI is a non-GAAP financial measure. 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. |
Highlights for 2Q 2023:
- Core EPS(4) was $1.16 compared to $1.02 for 2Q 2022.
- Core ROA(4) was 1.41% compared to 1.27% for 2Q 2022.
- Net loan growth of 2% (6% annualized) from 1Q 2023 driven by growth across the commercial portfolio and our consumer partnership with Spring EQ.
- Customer deposits increased by $380.1 million, or 2% (10% annualized) for the quarter, driven by transactional Trust and Wealth deposits, and reflecting our highly diverse and insured/protected deposit portfolio. Noninterest deposits represent 34% of total customer deposits.
- Net interest margin of 4.11% compared to 4.25% for 1Q 2023, reflects increasing deposit betas, partially offset by higher loan yields.
- Core fee revenue (noninterest income)(4) was $67.4 million, an increase of $3.7 million, or 6%, compared to 1Q 2023, resulting in a 27.0% core fee revenue ratio(4).
- Total net credit costs were $16.4 million, primarily due to provision driven by overall net loan growth, economic forecast changes and losses related to two C&I relationships that resolved during the quarter. The ACL coverage ratio was 1.28%, flat from 1Q 2023.
- WSFS Bank capital ratios remain well above well-capitalized levels, with total risk-based capital of 14.84% and CET1 of 13.66%.
- WSFS repurchased 357,278 shares of common stock at an average price of $38.32 per share, totaling an aggregate of $13.7 million. The Board of Directors also approved a quarterly cash dividend of $0.15 per share.
(4) As used in this press release, core EPS, core ROA, core fee revenue (noninterest income), and core fee revenue ratio are non-GAAP financial measures. These non-GAAP financial measures exclude certain pre-tax adjustments and the tax impact of such adjustments. 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. |
Second Quarter 2023 Discussion of Financial Results
Balance Sheet
The following table summarizes loan and lease balances and composition at June 30, 2023 compared to March 31, 2023 and June 30, 2022:
Loans and Leases | |||||||||||||||||||||
(Dollars in millions) | June 30, 2023 | March 31, 2023 | June 30, 2022 | ||||||||||||||||||
Commercial & industrial (C&I) | $ | 4,533 | 37 | % | $ | 4,443 | 37 | % | $ | 4,444 | 39 | % | |||||||||
Commercial mortgage | 3,553 | 29 | 3,473 | 29 | 3,322 | 29 | |||||||||||||||
Construction | 955 | 7 | 1,024 | 8 | 934 | 8 | |||||||||||||||
Commercial small business leases | 590 | 5 | 577 | 5 | 513 | 5 | |||||||||||||||
Total commercial loans and leases | 9,631 | 78 | 9,517 | 79 | 9,213 | 81 | |||||||||||||||
Residential mortgage | 847 | 7 | 801 | 6 | 808 | 7 | |||||||||||||||
Consumer | 1,905 | 16 | 1,868 | 16 | 1,522 | 13 | |||||||||||||||
ACL | (172 | ) | (1 | ) | (169 | ) | (1 | ) | (142 | ) | (1 | ) | |||||||||
Net loans and leases | $ | 12,211 | 100 | % | $ | 12,017 | 100 | % | $ | 11,401 | 100 | % | |||||||||
At June 30, 2023, WSFS’ net loan and lease portfolio increased $194.5 million, or 6% (annualized), when compared with March 31, 2023 due to increases of $90.1 million in C&I, $79.7 million in Commercial Real Estate mortgage, primarily due to construction loans converting to permanent mortgages, $36.8 million in our consumer portfolio, primarily from Spring EQ (home equity loans), and $13.5 million in NewLane (commercial small business leases).
In line with our 2022-2024 Strategic Plan, the C&I portfolio (including owner-occupied real estate) continued to be our largest portfolio at 37% of net loans and leases. Additionally, our total commercial loan and lease portfolio continues to represent a majority of our lending portfolio at 78% of net loans and leases.
Net loans and leases at June 30, 2023 increased $809.6 million, or 7%, when compared with June 30, 2022. The increase was driven by increases of $382.6 million in our consumer portfolio, primarily from Spring EQ, $231.1 million in commercial mortgage, $89.0 million in C&I, and $77.3 million in NewLane.
The following table summarizes customer deposit balances and composition at June 30, 2023 compared to March 31, 2023 and June 30, 2022:
Customer Deposits | |||||||||||||||||||||
(Dollars in millions) | June 30, 2023 | March 31, 2023 | June 30, 2022 | ||||||||||||||||||
Noninterest demand | $ | 5,462 | 34 | % | $ | 5,299 | 33 | % | $ | 6,552 | 38 | % | |||||||||
Interest-bearing demand | 2,969 | 18 | 3,159 | 20 | 3,396 | 20 | |||||||||||||||
Savings | 1,815 | 11 | 1,967 | 13 | 2,313 | 13 | |||||||||||||||
Money market | 4,375 | 27 | 4,002 | 25 | 3,882 | 23 | |||||||||||||||
Total core deposits | 14,621 | 90 | 14,427 | 91 | 16,143 | 94 | |||||||||||||||
Customer time deposits | 1,640 | ||||||||||||||||||||
