WSFS Financial Corporation (Nasdaq: WSFS), the parent company of WSFS Bank, today announced its financial results for the third quarter of 2023.
Selected financial results and metrics are as follows:
(Dollars in millions, except per share data) | 3Q 2023 | 2Q 2023 | 3Q 2022 | |||||||||
Net interest income | $ | 182.6 | $ | 181.8 | $ | 176.8 | ||||||
Fee revenue | 72.7 | 66.9 | 62.7 | |||||||||
Total net revenue | 255.3 | 248.7 | 239.5 | |||||||||
Provision for credit losses | 18.4 | 15.8 | 7.5 | |||||||||
Noninterest expense | 139.7 | 141.3 | 132.9 | |||||||||
Net income attributable to WSFS | 74.2 | 68.7 | 73.4 | |||||||||
Pre-provision net revenue (PPNR)(1) | 115.6 | 107.5 | 106.6 | |||||||||
Earnings per share (EPS) (diluted) | 1.22 | 1.12 | 1.16 | |||||||||
Return on average assets (ROA) (a) | 1.45 | % | 1.36 | % | 1.44 | % | ||||||
Return on average equity (ROE) (a) | 12.6 | 11.8 | 12.4 | |||||||||
Fee revenue as % of total net revenue | 28.4 | 26.8 | 26.1 | |||||||||
Efficiency ratio | 54.6 | 56.7 | 55.4 | |||||||||
See “Notes” |
GAAP results for the quarterly periods shown included the following items that are excluded from core results.
3Q 2023 | 2Q 2023 | 3Q 2022 | ||||||||||||||||
(Dollars in millions, except per share data) | Total
| Per share (after-tax) | Total (pre-tax) | Per share (after-tax) | Total (pre-tax) | Per share (after-tax) | ||||||||||||
Visa derivative valuation adjustment(2) | $ | 0.8 | $ | 0.01 | $ | 0.6 | $ | 0.01 | $ | 2.3 | $ | 0.03 | ||||||
Corporate development and restructuring expense | 0.1 | — | 2.8 | 0.03 | 2.6 | 0.03 | ||||||||||||
(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, "Our 3Q operating results reflect the continued optimization of the significant franchise investment over the past several years. Revenue growth was highlighted by solid quarterly loan growth of 3%, a NIM of 4.08%, and strong performance across our major fee businesses.
"While the Greater Philadelphia and Delaware regional economy continues to demonstrate resiliency, we anticipate continued uncertainty in the near-term outlook. In that regard, our balance sheet remains strong with an ACL coverage of 1.28%, significant liquidity capacity, and all regulatory capital ratios above “well-capitalized” levels.
"During the quarter, we were pleased to announce the expansion of our Wealth Management business in southern Delaware and the establishment of a new presence in Boca Raton, Florida with the acquisition of a registered investment advisory firm's business based in Rehoboth Beach, Delaware.
"In addition, WSFS was honored to be voted reader's pick as the Best Bank For Customer Service in 2023 in South Jersey Biz Magazine. This recognition is another tribute to our over 2,200 Associates who live our Mission: We Stand For Service every day."
Highlights for 3Q 2023:
- Core EPS(3) was $1.23 flat from 3Q 2022.
- Core ROA(3) was 1.46% compared to 1.52% for 3Q 2022.
- Core PPNR(3) of $116.4 million, or 2.28% of average assets(3) compared to $111.4 million and 2.18%, respectively, for 3Q 2022.
- Net loan growth of 3% (11% annualized) from 2Q 2023 driven by growth across the commercial portfolio and our consumer partnership with Spring EQ.
- Customer deposits decreased by $363.3 million, or 2% (9% annualized) for the quarter, driven by a $306.1 million decrease primarily in transactional trust deposits, which tend to be large and short-term in nature.
- Net interest margin of 4.08% compared to 4.11% for 2Q 2023, reflects increasing deposit betas, partially offset by higher loan yields.
- Core fee revenue (noninterest income)(3) was a record $73.4 million, an increase of $6.0 million across all major business lines, or 9% (not annualized), compared to 2Q 2023.
- Total net credit costs were $18.2 million, driven by overall net loan growth and portfolio migration. The ACL coverage ratio was 1.28%, flat from 2Q 2023.
- WSFS Bank capital ratios remain significantly above "well-capitalized" levels, with total risk-based capital of 14.43% and Common Equity Tier 1 of 13.26%.
- WSFS repurchased 386,900 shares of common stock at an average price of $40.67 per share, totaling an aggregate of $15.7 million. The Board of Directors also approved a quarterly cash dividend of $0.15 per share.
| (3) As used in this press release, core EPS, core ROA, core PPNR, core PPNR as a percent of average assets, and core fee revenue (noninterest income) 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. |
Third Quarter 2023 Discussion of Financial Results
Balance Sheet
The following table summarizes loan and lease balances and composition at September 30, 2023 compared to June 30, 2023 and September 30, 2022:
Loans and Leases | |||||||||||||||||||||
(Dollars in millions) | September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||||||||||||||||
Commercial & industrial (C&I) | $ | 4,590 | 37 | % | $ | 4,533 | 37 | % | $ | 4,445 | 38 | % | |||||||||
Commercial mortgage | 3,646 | 29 | 3,553 | 29 | 3,280 | 28 | |||||||||||||||
Construction | 1,043 | 8 | 955 | 7 | 1,028 | 9 | |||||||||||||||
Commercial small business leases | 606 | 5 | 590 | 5 | 535 | 5 | |||||||||||||||
Total commercial loans and leases | 9,885 | 79 | 9,631 | 78 | 9,288 | 80 | |||||||||||||||
Residential mortgage | 873 | 7 | 847 | 7 | 802 | 7 | |||||||||||||||
Consumer | 1,957 | 15 | 1,905 | 16 | 1,677 | 14 | |||||||||||||||
ACL | (176 | ) | (1 | ) | (172 | ) | (1 | ) | (146 | ) | (1 | ) | |||||||||
Net loans and leases | $ | 12,539 | 100 | % | $ | 12,211 | 100 | % | $ | 11,621 | 100 | % | |||||||||
At September 30, 2023, WSFS’ net loan and lease portfolio increased $328.0 million, or 3% (11% annualized), when compared with June 30, 2023 due to increases of $92.9 million in commercial mortgage, $88.3 million in construction loans, $56.7 million in C&I, $51.9 million in consumer loans, primarily from Spring EQ (home equity loans), and $15.6 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 79% of net loans and leases.
Net loans and leases at September 30, 2023 increased $918.2 million, or 8%, when compared with September 30, 2022. The increase was driven by increases of $365.3 million in commercial mortgage, $280.0 million in consumer loans, primarily from Spring EQ, $144.9 million in C&I, and $71.0 million in NewLane.
The following table summarizes customer deposit balances and composition at September 30, 2023 compared to June 30, 2023 and September 30, 2022:
Customer Deposits | ||||||||||||||||||
(Dollars in millions) | September 30, 2023 | June 30, 2023 | September 30, 2022 | |||||||||||||||
Noninterest demand | $ | 4,913 | 31 | % | $ | 5,462 | 34 | % | $ | 6,171 | 37 | % | ||||||
Interest-bearing demand | 3,028 | 19 | 2,969 | 18 | 3,462 | 21 | ||||||||||||
Savings | 1,681 | 10 | 1,815 | 11 | 2,266 | 14 | ||||||||||||
Money market | 4,560 | 29 | 4,375 | 27 | 3,740 | 22 | ||||||||||||
Total core deposits | 14,182 | 89 | 14,621 | 90 | 15,639 | 94 | ||||||||||||
Customer time deposits | 1,715 | 11 | 1,640 | 10 | 1,063 | 6 | ||||||||||||
Total customer deposits | $ | 15,897 | 100 | % | $ | 16,261 | 100 | % | $ | 16,702 | 100 | % | ||||||
Total customer deposits decreased $363.3 million, or 2% (9% annualized), when compared with June 30, 2023, driven by a $306.1 million d
