Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
April 23, 2018
Date of Report
(Date of earliest event reported)
 
 
WSFS Financial Corporation
(Exact name of registrant as specified in its charter)
 
 
Delaware
  
001-35638
  
22-2866913
(State or other jurisdiction
of incorporation)
  
(SEC Commission
File Number)
  
(IRS Employer
Identification Number)
 
 
 
 
500 Delaware Avenue, Wilmington, Delaware
  
19801
(Address of principal executive offices)
  
(Zip Code)
Registrant’s telephone number, including area code: (302) 792-6000
Not Applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
Written communications pursuant to Rule 425 under the Securities Act
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act






WSFS FINANCIAL CORPORATION
INFORMATION TO BE INCLUDED IN THE REPORT
Section 2 – Financial Information
Item 2.02 Results of Operation and Financial Condition
On April 23, 2018, the Registrant issued a press release to report earnings for the quarter ended March 31, 2018.  A copy of the press release is furnished with this Form 8-K as an exhibit.
Section 9 – Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
(d) Exhibits:
99    Press Release Dated April 23, 2018
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.
 
 
 
WSFS FINANCIAL CORPORATION
 
 
 
Date:
April 24, 2018
By:
 
/s/ Dominic C. Canuso
 
 
 
 
Dominic C. Canuso
Executive Vice President and
Chief Financial Officer



Exhibit

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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
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EXHIBIT 99
 
 
 
FOR IMMEDIATE RELEASE
  
Investor Relations Contact: Dominic C. Canuso
 
  
(302) 571-6833
April 23, 2018
 
dcanuso@wsfsbank.com
 
  
Media Contact: Jimmy A. Hernandez
 
  
(302) 571-5254
 
 
jhernandez@wsfsbank.com

WSFS REPORTS NET INCOME OF $37.4 MILLION AND 1Q 2018 EPS OF $1.16.
RESULTS POSITIVELY IMPACTED BY A $15.3 MILLION PRE-TAX VALUATION GAIN
ON VISA CLASS B SHARES AND A $1.7 MILLION FRAUD RECOVERY.
STRONG OPERATING RESULTS INCLUDE A NET INTEREST MARGIN OF 4.01%
AND ROBUST ORGANIC FEE INCOME GROWTH.
QUARTERLY CASH DIVIDEND INCREASED 22% TO $0.11 PER SHARE.
WILMINGTON, Del.WSFS Financial Corporation (Nasdaq: WSFS), or the Company, the parent company of WSFS Bank, reported net income of $37.4 million, or $1.16 per diluted common share for 1Q 2018 compared to net income of $18.9 million, or $0.59 per share for 1Q 2017 and net loss of $9.8 million, or $0.31 per share for 4Q 2017. 1Q 2018 results include an unrealized valuation gain of $15.3 million (pre-tax), or $0.36 per share (after-tax), related to our adoption of the new Financial Instruments Accounting Standards Update (ASU) and its impact on the valuation of our equity investment in Visa Class B shares, and a fraud recovery of $1.7 million, or $0.04 per share. The results for 4Q 2017 included $32.9 million of after-tax expense, or $1.05 per share, related to items disclosed in WSFS' previous press releases and SEC filings.
Net revenue (which includes net interest income and noninterest income) was $105.2 million for 1Q 2018, an increase of $24.0 million, or 30%, from 1Q 2017. Net interest income was $57.7 million, an increase of $4.6 million, or 9%, from 1Q 2017; and fee income (noninterest income) was $47.5 million, an increase of $19.4 million, or 69%, from 1Q 2017. The increase in noninterest income includes the $15.3 million unrealized valuation gain described above. Noninterest expenses were $53.4 million in 1Q 2018, an increase of $1.9 million, or 4%, from 1Q 2017 and included the fraud recovery described above.
For 1Q 2018, reported return on assets (ROA) was 2.20% and the efficiency ratio was 50.6%.




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500 Delaware Avenue, Wilmington, Delaware 19801
  
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Highlights for 1Q 2018: 
Core earnings per share (EPS)(1) of $0.76 for 1Q 2018 increased a substantial 29% from $0.59 in 1Q 2017.
Core ROA(1) was 1.43% for 1Q 2018, a meaningful 28% increase compared to 1.12% for 1Q 2017.
Core return on average tangible common equity (ROTCE)(1) was 18.8% for 1Q 2018 compared to 15.6% for 1Q 2017.
Core net revenue(1) of $89.8 million increased $8.9 million, or 11% from 1Q 2017, reflecting strong organic growth, including a $4.6 million, or 9%, increase in core net interest income(1) and a $4.3 million, or 16% increase in core fee income (noninterest income)(1) across several business lines.
The net interest margin increased a robust 11 basis points to 4.01% from 1Q 2017, as a result of continued strong organic growth, pricing discipline and balance sheet mix management.
Core noninterest expense(1) increased $3.9 million, or only 8% from 1Q 2017, creating a full 3 percentage points of positive operating leverage and resulting in a core efficiency ratio(1) of 61.1%, a significant improvement compared to 62.7% for 1Q 2017.
As a result of our strong core performance, the Board of Directors approved a 22% increase in the quarterly cash dividend to $0.11 per share of common stock from the previous $0.09 per share. The cash dividend has increased $0.04 per share, or 57%, since October 2017.
















(1) As used in this release, core earnings per share (EPS), core return on average assets (ROA), core net revenue, core net interest income, core fee income (noninterest income), core noninterest expense and core efficiency ratio are non-GAAP financial measures. For a reconciliation of these measures to their comparable GAAP measures, see pages 20 and 21 of this press release.




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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
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Notable items in the quarter:
During 1Q 2018, WSFS recorded $15.3 million of unrealized valuation gain related to our adoption of the ASU on Financial Instruments (ASU 2016-01), described earlier in this release. This gain resulted from our investment in approximately 360,000 shares of Visa Class B stock. While a portion of this investment was acquired upon Visa, Inc.'s initial public offering, most of the shares were acquired over the last few years through private transactions and auctions. The cost basis of these shares was $14.1 million and we were required to revalue this investment as a result of the new ASU becoming effective this quarter, and being triggered by recently observed market transactions.
WSFS recorded an initial $1.7 million pre-tax insurance recovery, net of deductible, of the $2.8 million pre-tax fraud loss recognized in 4Q 2017, and we continue to work with insurance carriers to recover additional amounts. The recovery was recorded as a reduction of noninterest expense in the quarter.
We realized essentially no net gains on sales of securities and corporate development expenses in 1Q 2018, compared to $0.3 million, or less than $0.01 per share of both net gains on sales of securities and corporate development expenses in 1Q 2017.
WSFS recognized $0.9 million of noninterest expense resulting from net transaction costs incurred from the early cash-out of all of its eligible Bank-Owned Life Insurance (BOLI) policies during the quarter. We surrendered these long-term BOLI policies early because they diluted the Company's current ROA performance and our return expectations, as a result of the impacts of changes in the corporate tax rate and the rising interest rate environment. During the quarter, we received $96.4 million of cash proceeds from the surrender, and redeployed $60.0 million in agency mortgage-backed securities at a tax equivalent yield of 3.38%. The Company expects to invest the remaining $36.4 million in agency mortgage-backed securities during 2Q 2018. The interest income earned from reinvesting these proceeds for the remainder of 2018 is expected to more than offset the $0.9 million of net transaction costs and foregone BOLI income.

All notable items above are excluded from core earnings, with the exception of the $0.9 million of noninterest expense resulting from the surrender of our BOLI policies.





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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
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CEO outlook and commentary
Mark A. Turner, President and CEO, said, “In addition to the strong performance of our core business during the first quarter, our results were positively impacted by the adoption of a new accounting pronouncement and the initial recovery of a fraud loss previously disclosed in 2017. The accounting change required us to recognize the value of our significant investment in Visa Class B shares and we are also pleased to have made progress in our recovery efforts related to the fraud loss.
"Our strong first quarter core results position us to achieve the primary goals in our 2016-2018 Strategic Plan, including a full year 2018 ROA of 1.50%. Core earnings growth was entirely organic, well balanced across our businesses, and included strong growth in both net interest income and fee income. For the quarter, we recorded core EPS of $0.76 and core ROA of 1.43%, which represent significant improvements from the prior year, even before the favorable impact of the recent tax rate change. Our first quarter core results also demonstrate continued optimization of previous acquisitions evidenced by a very healthy 3 percentage points of positive operating leverage compared to 1Q 2017, and a 1Q 2018 core efficiency ratio of a healthy 61.1%. We are also encouraged that we achieved many very strong results despite the first quarter typically being our seasonally slowest quarter.
“During the quarter, we were also honored to receive the 2017 Gallup Great Workplace Award for the third year in a row, in only our third year of eligibility. We believe that our intense focus on Associate and Customer engagement is the driving force behind our sustainable high performance. Our continued robust organic growth, strong financial performance, and marketplace accolades demonstrate the success of our focused strategy of ‘Engaged Associates delivering stellar experiences growing Customer Advocates and value for our Owners’.”












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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
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First Quarter 2018 Discussion of Financial Results
Net interest margin increased due to balance sheet positioning and disciplined pricing
Net interest margin for 1Q 2018 was 4.01%, an increase of 11 bps from 3.90% for 1Q 2017. Excluding a 10 bps reduction in purchased loan accretion, the net interest margin organically increased 21 bps compared to 1Q 2017, which includes an estimated 8 bps resulting from the higher short-term interest rate environment, 7 bps related to the redemption of $55.0 million of our senior notes in late 3Q 2017, and approximately 6 bps from balance sheet growth and mix. The year-over-year decline in purchased loan accretion was anticipated due to expected payments and maturities of previously acquired loans. Net interest income for 1Q 2018 was $57.7 million, an increase of $4.6 million, or 9% compared to 1Q 2017.
Net interest margin for 1Q 2018 increased 1 bp compared to 4Q 2017. A 3 bps decrease in purchased loan accretion compared to 4Q 2017 was offset by a 4 bps increase primarily resulting from the higher short-term rate environment. Net interest income was flat compared to 4Q 2017 due primarily to fewer days in 1Q 2018.
Balanced loan portfolio growth continues
At March 31, 2018, WSFS’ net loan portfolio was $4.8 billion, an increase of $14.3 million, or 1% (annualized), from December 31, 2017. The small increase includes a decline in residential mortgages of $24.9 million, reflecting our ongoing strategy of selling most newly-originated residential mortgages in the secondary market. Excluding the intentional decline in residential mortgages, net loans increased $39.2 million, or 3% (annualized), including a $24.4 million, or 18% (annualized), increase in consumer loans and a $15.1 million, or 2% (annualized), increase in total commercial loans. Our quarter-over-quarter loan growth was primarily impacted by anticipated loan payoffs in our commercial real estate portfolio, timing of loan closings between 1Q 2018 and 4Q 2017 and the highly competitive pricing environment as well as seasonal slowness in 1Q 2018.
Compared to March 31, 2017, net loans increased $240.2 million, or 5%. The overall increase includes a $50.0 million decline in residential mortgages, consistent with our ongoing strategy for these loans described above. Excluding the intentional decline in residential mortgages, net loans increased $290.2 million, or 6%, including an increase of $139.6 million, or 6%, in commercial and industrial (C&I) loans, an increase of $118.8 million, or 25%, in consumer loans, and an increase of $34.1 million, or 13%, in construction loans.




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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
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The following table summarizes loan balances and composition at March 31, 2018 compared to December 31, 2017 and March 31, 2017:
(Dollars in thousands)
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
Commercial & industrial
 
$
2,570,999

 
54
 %
 
$
2,540,853

 
52
 %
 
$
2,431,442

 
53
 %
Commercial real estate
 
1,156,955

 
24

 
1,180,399

 
25

 
1,158,221

 
25

Construction
 
288,373

 
6

 
280,017

 
6

 
254,229

 
6

Total commercial loans
 
4,016,327

 
84

 
4,001,269

 
83

 
3,843,892

 
84

Residential mortgage
 
259,899

 
5

 
284,798

 
6

 
309,972

 
7

Consumer
 
586,279

 
12

 
561,905

 
12

 
467,507

 
10

Allowance for loan losses
 
(40,810
)
 
(1
)
 
(40,599
)
 
(1
)
 
(39,826
)
 
(1
)
Net Loans
 
$
4,821,695

 
100
 %
 
$
4,807,373

 
100
 %
 
$
4,581,545

 
100
 %
Credit quality trends remain stable and strong

Credit quality metrics during 1Q 2018 reflect continued strength in the portfolio.
Total problem assets, which includes all criticized, classified, and nonperforming loans as well as other real estate owned (OREO), were $151.8 million, or 21.1% of Tier 1 capital plus the allowance for loan losses (ALLL) at March 31, 2018, nearly flat compared to $150.3 million, or 21.3%, at December 31, 2017. Classified assets, which are included in total problem assets, decreased $4.0 million to $106.7 million at March 31, 2018 compared to $110.7 million at December 31, 2017.
Total delinquencies, which include nonperforming delinquencies, were $27.1 million at March 31, 2018, or 0.56% of gross loans, minimally changed from $25.3 million and 0.53% of gross loans at December 31, 2017. Excluding nonperforming delinquencies, performing loan delinquencies were only 0.19% of gross loans at March 31, 2018.
Total nonperforming assets decreased $2.1 million or 4% to $56.9 million at March 31, 2018, as compared to $59.0 million at December 31, 2017. The nonperforming assets to total assets ratio was 0.81% at March 31, 2018 compared to 0.84% at December 31, 2017.
Net charge-offs for 1Q 2018 were $3.4 million, or 0.29%, (annualized) of average gross loans, a decrease from $3.7 million, or 0.31% (annualized), in 4Q 2017, and an increase from $2.1 million, or 0.19% (annualized), during 1Q 2017. Total credit costs (provision for loan losses, loan workout expenses, OREO expenses and other credit costs) were $4.1 million for 1Q 2018, flat compared to $4.1 million during 4Q 2017 and an increase from $2.8 million during 1Q 2017.




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The ratio of the ALLL to total gross loans was 0.84% at both March 31, 2018 and December 31, 2017. Excluding the balances for acquired loans (marked-to-market at acquisition), the ALLL to total gross loans ratio would have been 0.96% at March 31, 2018 compared with 0.97% at December 31, 2017. The ALLL was 120% of nonaccruing loans at March 31, 2018 compared to 111% at December 31, 2017 and 100% at March 31, 2017.
 
Customer funding reflects expected seasonality
Total customer funding was $4.9 billion at March 31, 2018, a $69.2 million, or 6% (annualized), decrease from December 31, 2017. The decline in deposits includes a $55.0 million decrease in public funding account balances, which is consistent with historical seasonal trends. In addition, during 1Q 2018, we continued to take the opportunity to attract longer-term, fixed-rate funding and lengthen our overall portfolio duration in a rising rate environment. As a result, CDs increased $13.0 million, or 8% (annualized) in 1Q 2018.
Customer funding decreased $151.2 million, or 3% compared to March 31, 2017. Customer funding balances at March 31, 2017 were positively impacted by one large short-term trust deposit of $352.4 million that was received late in 1Q 2017. Excluding the impact of this deposit, customer funding at March 31, 2018 increased $201.2 million, or 4% compared to March 31, 2017. This included a core deposit increase of $129.3 million, or 3% over the prior year, with $125.3 million attributable to no- and low-cost checking deposit accounts. CDs also increased $71.9 million over the prior year consistent with our strategy to attract longer-term, fixed-rate funding in a rising rate environment.
Core deposits were 87% of total customer deposits, and no- and low-cost checking deposit accounts represent a robust 48% of total customer deposits at March 31, 2018. These core deposits predominantly represent longer-term, less price-sensitive customer relationships, which are valuable in a rising-rate environment. The ratio of loans to customer deposits was 97% at March 31, 2018.




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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
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The following table summarizes customer funding balances and composition at March 31, 2018 compared to December 31, 2017 and March 31, 2017:
(Dollars in thousands)
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
Noninterest demand
 
$
1,372,271

 
28
%
 
$
1,420,760

 
28
%
 
$
1,658,111

 
33
%
Interest-bearing demand
 
991,020

 
20

 
1,071,512

 
21

 
932,284

 
18

Savings
 
561,432

 
11

 
549,744

 
11

 
597,186

 
12

Money market
 
1,382,178

 
28

 
1,347,146

 
27

 
1,342,464

 
26

Total core deposits
 
4,306,901

 
87

 
4,389,162

 
87

 
4,530,045

 
89

Customer time deposits
 
642,116

 
13

 
629,071

 
13

 
570,186

 
11

Total customer deposits
 
$
4,949,017

 
100
%
 
$
5,018,233

 
100
%
 
$
5,100,231

 
100
%

Strong and diversified organic core fee income growth
Core fee income (noninterest income) increased by $4.3 million, or 16%, to $32.1 million compared to 1Q 2017. All of this growth was organic, demonstrating our ability to execute on our high-service, fee-based strategy. These strong results represent growth across all of our businesses and include increases of $1.7 million from credit/debit card and ATM income, $1.2 million from investment management and fiduciary revenue, $1.0 million related to our traditional banking business, and $0.6 million from mortgage banking.
When compared to 4Q 2017, core fee income decreased $0.1 million, or less than 0.1% (not annualized), due primarily to a $0.2 million decline in BOLI fee income associated with the early surrender of our BOLI policies during 1Q 2018. The quarter-over-quarter core fee income results are relatively strong, when considering the first quarter has fewer days and is impacted by normal seasonal declines in deposit service charges and other similar transactional banking activities.
For 1Q 2018, core fee income was 35.6% of core net revenue, compared to 34.3% for 1Q 2017, and was well diversified among various sources, including traditional banking, mortgage banking, wealth management and cash logistics services (Cash Connect®).




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Noninterest expenses reflect improved efficiency
Core noninterest expense for 1Q 2018 was $55.1 million, an increase of $3.9 million, or 8%, from $51.2 million in 1Q 2017. Contributing to the year-over-year increase was $1.1 million of higher costs to support Cash Connect® revenue growth, the previously described $0.9 million of net transaction costs incurred from the surrender of the Company’s BOLI policies during the quarter, $0.8 million of higher compensation and benefit costs to support overall franchise growth, and $1.1 million of higher other operating costs to support growth in our balance sheet and fee-based businesses.
When compared to 4Q 2017, core noninterest expense increased $3.4 million. Contributing to the quarter-over-quarter increase was $1.7 million of higher compensation and related costs, $0.9 million of net transaction costs from the surrender of our BOLI policies described above, $0.4 million from higher occupancy costs, and a $0.3 million vendor credit that was recorded in 4Q 2017. The increase in compensation and occupancy costs reflects typical seasonality related to taxes and other benefits, such as 401(k) matching costs, the payment of incentives, annual merit increases and the reset of employer tax caps during the first quarter, as well as higher weather-related maintenance costs associated with our physical locations.
Our core efficiency ratio was 61.1% in 1Q 2018, seasonally higher compared to 57.0% in 4Q 2017, and a substantial improvement compared to 62.7% in 1Q 2017. The year-over-year improvement reflects successful optimization of our acquisition-related and organic growth and continued economies of scale as we grow.
Income taxes
The Company recorded a $10.8 million income tax provision in 1Q 2018, compared to provisions of $27.9 million in 4Q 2017 and $8.6 million in 1Q 2017.
The effective tax rate was 22.4% in 1Q 2018, 154.5% in 4Q 2017, and 31.2% in 1Q 2017. The higher tax rate in 4Q 2017 was due to previously disclosed transactions related to the 2017 Tax Cuts and Jobs Act. The lower year-over-year tax rate reflects the reduction of the corporate federal tax rate beginning in 1Q 2018 offset modestly by lower tax benefits realized from stock-based compensation compared to 1Q 2017.








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Selected Business Segments (included in previous results):
Wealth Management segment fee revenue grew 15% over the prior year
The Wealth Management segment provides a broad array of fiduciary, investment management, credit and deposit products to clients through six businesses. WSFS Wealth Investments provides insurance, asset management, and brokerage products primarily to our retail banking clients with $191.8 million in assets under management (AUM). Cypress Capital Management, LLC is a registered investment adviser with $905.2 million(2) in AUM. Cypress is a fee-only wealth management firm whose primary market segment is high net worth individuals, offering a “balanced” investment style focused on preservation of capital and providing current income. West Capital Management is a registered investment adviser with $883.8 million in AUM. West Capital is a fee-only wealth management firm which operates under a multi-family office philosophy and provides fully-customized solutions tailored to the unique needs of institutions and high net worth individuals. Christiana Trust, with $17.3 billion(2) in AUM and assets under administration, provides fiduciary and investment services to personal trust clients; and trustee, agency, bankruptcy, administration, custodial and commercial domicile services to corporate and institutional clients. Powdermill Financial Solutions, LLC is a multi-family office that specializes in providing unique, independent solutions to high net worth individuals, families and corporate executives through a coordinated, centralized approach. WSFS Wealth Client Management serves high net worth clients by delivering credit and deposit products and partnering with other business units to deliver investment management and fiduciary products and services.
Total Wealth Management revenue (net interest income, fiduciary fees and other fee income) was $12.9 million for 1Q 2018. This represented an increase of $1.3 million, or 11% compared to 1Q 2017 and a decrease of $0.3 million, or 2% compared to 4Q 2017. Included in the year-over-year increase is fee revenue, which increased $1.3 million, or 15%, compared to 1Q 2017. The year-over-year increase reflects continued organic growth across our business lines, with particular strength in the capital markets and corporate trust services businesses.
Total noninterest expense (including intercompany allocations and provision for loan losses and credit costs) was $8.1 million during 1Q 2018 compared to $8.3 million during 1Q 2017 and $20.4 million during 4Q 2017. The year-over-year decrease was primarily the result of reduced provision for loan losses and other credit costs, partially offset by increased incentive compensation expense, due to higher revenue, and other costs necessary to support the growth of the Wealth Management business. The decrease in expenses from 4Q 2017 was due almost exclusively to a previously disclosed legal settlement of $12 million in 4Q 2017 in the Christiana Trust business line.
Pre-tax income in 1Q 2018 was $4.8 million compared to $3.3 million in 1Q 2017 and a loss of $7.1 million in 4Q 2017 and was driven by the above mentioned factors.



(2) AUM includes $164.2 million of Christiana Trust assets for which Cypress serves as sub-adviser.




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Cash Connect® net revenue increases 12% over same quarter 2017
Cash Connect® is a premier provider of ATM vault cash and smart safe cash logistics services in the United States. Cash Connect® services over 23,000 non-bank ATMs and retail safes nationwide with over $963 million in cash and other fee-based services. Cash Connect® also operates 441 ATMs for WSFS Bank, which has the largest branded ATM network in Delaware.
Our Cash Connect® division recorded $9.5 million of net revenue (fee income less funding costs) in 1Q 2018, an increase of $1.0 million, or 12%, from 1Q 2017, primarily due to continued growth in the bailment, cash management and smart safe lines of business, partially offset by higher funding costs. Net revenue was unchanged from 4Q 2017.
Non-interest expense (including intercompany allocations of expense) was $8.0 million in 1Q 2018, an increase of $1.1 million compared to 1Q 2017 and an increase of $0.5 million compared to 4Q 2017. The year-over-year increase in expenses was primarily due to higher operating costs associated with growth, higher off balance sheet funding costs, and investment in enhancing our smart safe technology platform.  Cash Connect® reported pre-tax income of $1.5 million for 1Q 2018, which was a decrease of $0.1 million, or 8% from 1Q 2017 and a decrease of $0.4 million in 1Q 2018 compared to 4Q 2017 as a result of margin compression from rising funding costs.

In 2018, Cash Connect® primarily remains strategically focused on expanding both ATM and smart safe managed services to offset margin compression resulting from the ATM industry consolidation trend and pressure generated by higher funding costs.  Cash Connect® is focused on improving ROA by driving operational efficiencies and leveraging more off-balance sheet cash.  Cash Connect® continues to drive strong growth to its smart safe network with 1,774 safes serviced, up from 970 safes at the end of first quarter 2017.   Additionally Cash Connect has a robust pipeline of smart safe opportunities generated by several national channel partners, which include independent sales organizations, smart safe manufacturers, armored carriers, and other financial institutions.






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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
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Capital management
WSFS’ total stockholders’ equity increased $21.9 million, or 3% (not annualized), to $746.3 million at March 31, 2018 from $724.3 million at December 31, 2017, primarily due to quarterly earnings, partially offset by the negative impact of market-value changes on available-for-sale securities, stock buybacks and the payment of the common stock dividend during the quarter.
WSFS’ tangible common equity(3) increased by 4% (not annualized) to $558.5 million at March 31, 2018 from $535.9 million at December 31, 2017 for the reasons described in the paragraph above.
WSFS’ common equity to assets ratio was 10.68% at March 31, 2018, and its tangible common equity to tangible assets ratio(3) increased by 34 bps during the quarter to 8.21%. At March 31, 2018, book value per share was $23.72, a $0.66 increase from December 31, 2017, and tangible common book value per share(4) was $17.75, a $0.69 increase from December 31, 2017.
At March 31, 2018, WSFS Bank’s Tier 1 leverage ratio of 10.10%, Common Equity Tier 1 capital ratio and Tier 1 capital ratio of 11.73%, and Total Capital ratio of 12.45%, were all substantially in excess of the “well-capitalized” regulatory benchmarks.
In 1Q 2018, WSFS repurchased 70,000 shares of common stock at an average price of $49.69 as part of our 5% buyback program approved by the Board of Directors in 4Q 2015. WSFS has 629,194 shares, or more than 2% of outstanding shares, remaining to repurchase under this current authorization.
As a result of our strong performance, the Board of Directors approved a 22%, or $0.02 per share, increase in the quarterly cash dividend to $0.11 per share of common stock. This dividend will be paid on May 25, 2018 to stockholders of record as of May 11, 2018.







(3) As used in this release, tangible common equity, tangible common equity to assets and tangible common book value per share are non-GAAP financial measures. For a reconciliation of these measures to their comparable GAAP measures, see pages 20 and 21 of this press release.




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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
13


First quarter 2018 earnings release conference call
Management will conduct a conference call to review 1Q 2018 results at 1:00 p.m. Eastern Time (ET) on Tuesday, April 24, 2018. Interested parties may listen to this call by dialing 1-877-312-5857. A rebroadcast of the conference call will be available beginning at 4 pm on Tuesday, April 24, 2018 until Tuesday, May 8, 2018 at 4 pm. by dialing 1-855-859-2056 and using Conference ID #7289895.
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 Delaware Valley. As of March 31, 2018, WSFS Financial Corporation had $7.0 billion in assets on its balance sheet and $19.1 billion in assets under management and administration. WSFS operates from 77 offices located in Delaware (46), Pennsylvania (29), 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 Christiana Trust, WSFS Wealth Investments, Cypress Capital Management, LLC, West Capital Management, Powdermill Financial Solutions, Cash Connect®, WSFS Mortgage and Arrow Land Transfer. Serving the 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 wsfsbank.com.





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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
14


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. 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, those related 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 the effects of declines in housing markets, an increase in unemployment levels and slowdowns in economic growth; the Company's level of nonperforming assets and the costs associated with resolving problem loans including litigation and other costs; 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 our loan portfolio; the extensive federal and state regulation, supervision and examination governing almost every aspect of the Company's operations including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations issued in accordance with this statute and potential expenses associated with complying with such regulations; possible additional loan losses and impairment of the collectability of loans; the Company's ability to comply with applicable capital and liquidity requirements (including the finalized Basel III capital standards), including our ability to generate liquidity internally or raise capital on favorable terms; possible changes in trade, monetary and fiscal policies, laws and regulations and other activities of governments, agencies, and similar organizations; any impairment of the Company's goodwill or other intangible assets; failure of the financial and operational controls of the Company's Cash Connect® division; conditions in the financial markets that may limit the Company's access to additional funding to meet its liquidity needs; the success of the Company's growth plans, including the successful integration of past and future acquisitions; The Company's ability to fully realize the cost savings and other benefits of its acquisitions, 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's trust and wealth management business; adverse judgments or other resolution of pending and future legal proceedings, and cost incurred in defending such proceedings; system failure or cybersecurity breaches of the Company's network security; the Company's ability to recruit and retain key employees; 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 and man-made disasters including terrorist attacks; 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, 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; the effects of any reputation, credit, interest rate, market, operational, legal, liquidity, regulatory and compliance risk resulting from developments related to any of the risks discussed above; and the costs associated with resolving any problem loans, litigation and other risks and uncertainties, including those discussed in the Company's Form 10-K for the year ended December 31, 2017 and other documents filed by the Company with the Securities and Exchange Commission from time to time. Forward-looking statements are as of the date they are made, and the Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.





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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
15


WSFS FINANCIAL CORPORATION     
FINANCIAL HIGHLIGHTS
SUMMARY STATEMENTS OF INCOME (Unaudited)
 
 
Three months ended
(Dollars in thousands, except per share data)
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
Interest income:
Interest and fees on loans
 
$
60,465

 
$
59,889

 
$
54,681

Interest on mortgage-backed securities
 
5,399

 
5,176

 
4,395

Interest and dividends on investment securities
 
1,120

 
1,124

 
1,249

Other interest income
 
629

 
367

 
501

 
 
67,613

 
66,556

 
60,826

Interest expense:
 
 
 
 
 
 
Interest on deposits
 
5,240

 
4,626

 
3,075

Interest on Federal Home Loan Bank advances
 
2,463

 
2,206

 
1,858

Interest on senior debt
 
1,179

 
1,179

 
2,121

Interest on trust preferred borrowings
 
557

 
522

 
446

Interest on other borrowings
 
460

 
298

 
223

 
 
9,899

 
8,831

 
7,723

Net interest income
 
57,714

 
57,725

 
53,103

Provision for loan losses
 
3,650

 
4,063

 
2,162

Net interest income after provision for loan losses
 
54,064

 
53,662

 
50,941

Noninterest income:
 
 
 
 
 
 
Credit/debit card and ATM income
 
9,805

 
9,710

 
8,131

Investment management and fiduciary revenue
 
9,189

 
9,420

 
8,039

Deposit service charges
 
4,630

 
4,666

 
4,397

Mortgage banking activities, net
 
1,737

 
1,508

 
1,185

Loan fee income
 
599

 
735

 
549

Investment securities gains, net
 
21

 
220

 
320

Unrealized gains on equity investment
 
15,346

 

 

Bank-owned life insurance income
 
232

 
421

 
276

Other income
 
5,908

 
5,755

 
5,195

 
 
47,467

 
32,435

 
28,092

Noninterest expense:
 
 
 
 
 
 
Salaries, benefits and other compensation
 
29,853

 
28,145

 
28,836

Occupancy expense
 
5,248

 
4,807

 
5,162

Equipment expense
 
3,089

 
3,020

 
3,124

Professional fees
 
1,725

 
2,045

 
1,635

Data processing and operations expense
 
1,907

 
1,594

 
1,618

Marketing expense
 
758

 
815

 
624

FDIC expenses
 
599

 
533

 
529

Loan workout and OREO expense
 
426

 
316

 
521

Corporate development expense
 

 
21

 
338

Provision for legal settlement
 

 
12,000

 

(Recovery of) provision for fraud loss
 
(1,665
)
 
2,844

 

Other operating expenses
 
11,472

 
11,925

 
9,119

 
 
53,412

 
68,065

 
51,506

Income before taxes
 
48,119

 
18,032

 
27,527

Income tax provision
 
10,769

 
27,864

 
8,590

Net income (loss)
 
$
37,350

 
$
(9,832
)
 
$
18,937

Diluted earnings (loss) per share of common stock:
 
$
1.16

 
$
(0.31
)
 
$
0.59

Weighted average shares of common stock outstanding for fully diluted EPS (q)
 
32,305,785

 
31,404,353

 
32,348,571

See “Notes”




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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
16


WSFS FINANCIAL CORPORATION     
FINANCIAL HIGHLIGHTS
SUMMARY STATEMENTS OF INCOME (Unaudited) - continued
 
 
Three months ended
 
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
Performance Ratios:
 
 
 
 
 
 
Return on average assets (a)
 
2.20
%
 
(0.56
)%
 
1.12
%
Return on average equity (a)
 
20.87

 
(5.19
)
 
11.00

Return on average tangible common equity (a)(o)
 
28.59

 
(6.60
)
 
15.59

Net interest margin (a)(b)
 
4.01

 
4.00

 
3.90

Efficiency ratio (c)
 
50.62

 
74.87

 
62.87

Noninterest income as a percentage of total net revenue (b)
 
44.98

 
35.68

 
34.29

See “Notes”





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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
17


WSFS FINANCIAL CORPORATION     
FINANCIAL HIGHLIGHTS (Continued)
SUMMARY STATEMENTS OF FINANCIAL CONDITION  (Unaudited)
(Dollars in thousands)
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
Assets:
 
 
 
 
 
 
Cash and due from banks
 
$
128,799

 
$
122,141

 
$
120,913

Cash in non-owned ATMs
 
577,561

 
598,117

 
730,747

Investment securities (d)
 
160,289

 
161,809

 
197,206

Other investments
 
66,329

 
52,240

 
35,355

Mortgage-backed securities (d)
 
907,818

 
837,499

 
755,530

Net loans (e)(f)(l)
 
4,821,695

 
4,807,373

 
4,581,545

Bank owned life insurance
 
5,746

 
102,958

 
101,700

Goodwill and intangibles
 
187,790

 
188,444

 
190,372

Other assets
 
131,904

 
128,959

 
139,531

Total assets
 
$
6,987,931

 
$
6,999,540

 
$
6,852,899

Liabilities and Stockholders’ Equity:
 
 
 
 
 
 
Noninterest-bearing deposits
 
$
1,372,271

 
$
1,420,760

 
$
1,658,111

Interest-bearing deposits
 
3,576,746

 
3,597,473

 
3,442,120

Total customer deposits
 
4,949,017

 
5,018,233

 
5,100,231

Brokered deposits
 
253,498

 
229,371

 
276,599

Total deposits
 
5,202,515

 
5,247,604

 
5,376,830

Federal Home Loan Bank advances
 
587,162

 
710,001

 
298,095

Other borrowings
 
345,035

 
227,805

 
402,754

Other liabilities
 
106,940

 
89,785

 
71,219

Total liabilities
 
6,241,652

 
6,275,195

 
6,148,898

Stockholders’ equity
 
746,279

 
724,345

 
704,001

Total liabilities and stockholders’ equity
 
$
6,987,931

 
$
6,999,540

 
$
6,852,899

Capital Ratios:
 
 
 
 
 
 
Equity to asset ratio
 
10.68
%
 
10.35
%
 
10.27
%
Tangible common equity to tangible asset ratio (o)
 
8.21

 
7.87

 
7.71

Common equity Tier 1 capital (g) (required: 4.5%; well capitalized: 6.5%) (p)
 
11.73

 
11.36

 
11.25

Tier 1 leverage (g) (required: 4.00%; well-capitalized: 5.00%) (p)
 
10.10

 
9.73

 
9.60

Tier 1 risk-based capital (g) (required: 6.00%; well-capitalized: 8.00%) (p)
 
11.73

 
11.36

 
11.25

Total Risk-based capital (g) (required: 8.00%; well-capitalized: 10.00%) (p)
 
12.45

 
12.08

 
11.97

Asset Quality Indicators:
 
 
 
 
 
 
Nonperforming Assets:
 
 
 
 
 
 
Nonaccruing loans
 
$
34,060

 
$
36,436

 
$
39,678

Troubled debt restructuring (accruing)
 
20,248

 
20,061

 
17,260

Assets acquired through foreclosure
 
2,567

 
2,503

 
3,582

Total nonperforming assets
 
$
56,875

 
$
59,000

 
$
60,520

Past due loans (h)
 
$
555

 
$
461

 
$
1,765

Allowance for loan losses
 
40,810

 
40,599

 
39,826

Ratio of nonperforming assets to total assets
 
0.81
%
 
0.84
%
 
0.88
%
Ratio of nonperforming assets (excluding accruing TDRs) to total assets
 
0.52

 
0.56

 
0.63

Ratio of allowance for loan losses to total gross loans (i)(n)
 
0.84

 
0.84

 
0.87

Ratio of allowance for loan losses to nonaccruing loans
 
120

 
111

 
100

Ratio of quarterly net charge-offs to average gross loans (a)(e)(i)(n)
 
0.29

 
0.31

 
0.19

Ratio of year-to-date net charge-offs to average gross loans (a)(e)(i)(n)
 
0.29

 
0.22

 
0.19





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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
18


WSFS FINANCIAL CORPORATION    
FINANCIAL HIGHLIGHTS (Continued) 
AVERAGE BALANCE SHEET (Unaudited)
(Dollars in thousands)
 
Three months ended
 
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
 
 
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 real estate loans
 
$
1,440,607

 
$
18,165

 
5.11
%
 
$
1,469,316

 
$
18,713

 
5.05
%
 
$
1,392,925

 
$
17,023

 
4.96
%
Residential real estate loans
 
247,975

 
3,832

 
6.18

 
258,900

 
3,714

 
5.74

 
281,953

 
4,981

 
7.07

Commercial loans
 
2,562,207

 
31,208

 
4.96

 
2,497,730

 
30,575

 
4.89

 
2,391,817

 
26,897

 
4.59

Consumer loans
 
572,977

 
7,081

 
5.01

 
543,569

 
6,700

 
4.89

 
457,373

 
5,408

 
4.80

Loans held for sale
 
16,361

 
178

 
4.35

 
18,862

 
187

 
3.97

 
41,092

 
372

 
3.62

Total loans
 
4,840,127

 
60,464

 
5.07

 
4,788,377

 
59,889

 
4.98

 
4,565,160

 
54,681

 
4.87

Mortgage-backed securities (d)
 
841,880

 
5,399

 
2.57

 
824,838

 
5,176

 
2.51

 
759,159

 
4,395

 
2.32

Investment securities (d)
 
161,280

 
1,120

 
3.39

 
162,258

 
1,124

 
4.12

 
228,841

 
1,249

 
3.17

Other interest-earning assets
 
33,251

 
630

 
7.57

 
33,389

 
367

 
4.40

 
42,910

 
501

 
4.67

Total interest-earning assets
 
5,876,538

 
67,613

 
4.69
%
 
5,808,862

 
66,556

 
4.60
%
 
5,596,070

 
60,826

 
4.46
%
Allowance for loan losses
 
(41,464
)
 
 
 
 
 
(40,465
)
 
 
 
 
 
(40,556
)
 
 
 
 
Cash and due from banks
 
125,402

 
 
 
 
 
136,542

 
 
 
 
 
145,712

 
 
 
 
Cash in non-owned ATMs
 
516,259

 
 
 
 
 
575,121

 
 
 
 
 
683,138

 
 
 
 
Bank owned life insurance
 
87,058

 
 
 
 
 
102,781

 
 
 
 
 
101,522

 
 
 
 
Other noninterest-earning assets
 
336,051

 
 
 
 
 
342,467

 
 
 
 
 
348,582

 
 
 
 
Total assets
 
$
6,899,844

 
 
 
 
 
$
6,925,308

 
 
 
 
 
$
6,834,468

 
 
 
 
Liabilities and Stockholders’ Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing demand
 
$
995,667

 
$
815

 
0.33
%
 
$
1,017,068

 
$
781

 
0.30
%
 
$
919,456

 
$
385

 
0.17
%
Money market
 
1,386,836

 
1,589

 
0.46

 
1,345,702

 
1,375

 
0.41

 
1,323,969

 
1,026

 
0.31

Savings
 
553,461

 
253

 
0.19

 
554,028

 
262

 
0.19

 
574,252

 
213

 
0.15

Customer time deposits
 
622,544

 
1,686

 
1.10

 
597,111

 
1,467

 
0.97

 
581,547

 
1,090

 
0.76

Total interest-bearing customer deposits
 
3,558,508

 
4,343

 
0.49

 
3,513,909

 
3,885

 
0.44

 
3,399,224

 
2,714

 
0.32

Brokered deposits
 
254,307

 
897

 
1.43

 
243,441

 
741

 
1.21

 
175,789

 
361

 
0.83

Total interest-bearing deposits
 
3,812,815

 
5,240

 
0.56

 
3,757,350

 
4,626

 
0.49

 
3,575,013

 
3,075

 
0.35

FHLB of Pittsburgh advances
 
601,044

 
2,463

 
1.66

 
633,941

 
2,206

 
1.38

 
866,780

 
1,858

 
0.87

Trust preferred borrowings
 
67,011

 
557

 
3.37

 
67,011

 
522

 
3.09

 
67,011

 
446

 
2.70

Senior Debt
 
98,193

 
1,179

 
4.80

 
98,139

 
1,179

 
4.81

 
152,103

 
2,121

 
5.58

Other borrowed funds
 
151,288

 
460

 
1.23

 
122,313

 
298

 
0.97

 
142,292

 
223

 
0.64

Total interest-bearing liabilities
 
4,730,351

 
9,899

 
0.85
%
 
4,678,754

 
8,831

 
0.75
%
 
4,803,199

 
7,723

 
0.65
%
Noninterest-bearing demand deposits
 
1,350,342

 
 
 
 
 
1,414,356

 
 
 
 
 
1,255,950

 
 
 
 
Other noninterest-bearing liabilities
 
93,437

 
 
 
 
 
80,248

 
 
 
 
 
76,845

 
 
 
 
Stockholders’ equity
 
725,714

 
 
 
 
 
751,950

 
 
 
 
 
698,474

 
 
 
 
Total liabilities and stockholders’ equity
 
$
6,899,844

 
 
 
 
 
$
6,925,308

 
 
 
 
 
$
6,834,468

 
 
 
 
Excess of interest-earning assets over interest-bearing liabilities
 
$
1,146,187

 
 
 
 
 
$
1,130,108

 
 
 
 
 
$
792,871

 
 
 
 
Net interest and dividend income
 
 
 
$
57,714

 
 
 
 
 
$
57,725

 
 
 
 
 
$
53,103

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate spread
 
 
 
 
 
3.84
%
 
 
 
 
 
3.85
%
 
 
 
 
 
3.81
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin
 
 
 
 
 
4.01
%
 
 
 
 
 
4.00
%
 
 
 
 
 
3.90
%
See “Notes”




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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
19


WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS (Continued)
(Unaudited)
 
(Dollars in thousands, except per share data)
 
Three months ended
Stock Information:
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
Market price of common stock:
 
 
 
 
 
 
High
 
$53.00
 
$52.50
 
$48.20
Low
 
45.71
 
45.75
 
43.25
Close
 
48.55
 
47.85
 
45.95
Book value per share of common stock
 
23.72
 
23.06
 
22.38
Tangible common book value per share of common stock (o)
 
17.75
 
17.06
 
16.33
Number of shares of common stock outstanding (000s)
 
31,463
 
31,418
 
31,458
Other Financial Data:
 
 
 
 
 
 
One-year repricing gap to total assets (k)
 
(0.86)%
 
(0.80)%
 
1.15%
Weighted average duration of the MBS portfolio
 
5.4 years
 
5.2 years
 
5.3 years
Unrealized losses on securities available for sale, net of taxes
 
$(19,685)
 
$(6,401)
 
$(7,145)
Number of Associates (FTEs) (m)
 
1,148
 
1,159
 
1,138
Number of offices (branches, LPO’s, operations centers, etc.)
 
77
 
76
 
77
Number of WSFS owned ATMs
 
441
 
440
 
446
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 loan 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.
(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 (Generally Accepted Accounting Principles) financial information in its analysis of the Company’s performance. The Company’s management believes that these non-GAAP 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 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 non-GAAP measures, see pages 20 and 21 of this press release.
(p)
Calculated for Wilmington Savings Fund Society, FSB.
(q)
Diluted earnings per share considers the impact of potentially dilutive shares except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. For the three months ended December 31, 2017, 884,982 shares were anti-dilutive and were not included in the diluted earnings per share calculation.                       




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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
20


WSFS FINANCIAL CORPORATION    
FINANCIAL HIGHLIGHTS (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
 
Non-GAAP Reconciliation (o):
 
Three months ended
 
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
Net interest income (GAAP)
 
$
57,714

 
$
57,725

 
$
53,103

Core net interest income (non-GAAP)
 
$
57,714

 
$
57,725

 
$
53,103

Noninterest income (GAAP)
 
$
47,467

 
$
32,435

 
$
28,092

Less: Securities gains
 
21

 
220

 
320

Less: Unrealized gains on equity investment
 
15,346

 

 

Core fee income (non-GAAP)
 
$
32,100

 
$
32,215

 
$
27,772

Core net revenue (non-GAAP)
 
$
89,814

 
$
89,940

 
$
80,875

Core net revenue (non-GAAP)(tax-equivalent)
 
$
90,158

 
$
90,688

 
$
81,607

Noninterest expense (GAAP)
 
$
53,412

 
$
68,065

 
$
51,506

Less: Provision for legal settlement
 

 
12,000

 

(Plus)/less: (Recovery of)/provision for fraud loss
 
(1,665
)
 
2,844

 

Less: WSFS Foundation contribution
 

 
1,500

 

Less: Corporate development costs
 

 
21

 
338

Core noninterest expense (non-GAAP)
 
$
55,077

 
$
51,700

 
$
51,168

Core efficiency ratio (c)
 
61.1
%
 
57.0
%
 
62.7
%
 
 
 
 
 
 
 
 
 
End of period
 
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
Total assets
 
$
6,987,931

 
$
6,999,540

 
$
6,852,899

Less: Goodwill and other intangible assets
 
187,790

 
188,444

 
190,372

Total tangible assets
 
$
6,800,141

 
$
6,811,096

 
$
6,662,527

Total stockholders’ equity
 
$
746,279

 
$
724,345

 
$
704,001

Less: Goodwill and other intangible assets
 
187,790

 
188,444

 
190,372

Total tangible common equity (non-GAAP)
 
$
558,489

 
$
535,901

 
$
513,629

Calculation of tangible common book value per share:
 
 
 
 
Book value per share (GAAP)
 
$
23.72

 
$
23.06

 
$
22.38

Tangible common book value per share (non-GAAP)
 
17.75

 
17.06

 
16.33

Calculation of tangible common equity to tangible assets:
 
 
 
 
Equity to asset ratio (GAAP)
 
10.68
%
 
10.35
%
 
10.27
%
Tangible common equity to tangible assets ratio (non-GAAP)
 
8.21

 
7.87

 
7.71






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WSFS Bank Center
500 Delaware Avenue, Wilmington, Delaware 19801
  
21


 
 
Three months ended
 
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
GAAP net (loss) income
 
$
37,350

 
$
(9,832
)
 
$
18,937

Plus (less): Pre-tax adjustments: Securities gains, unrealized gains, recovery of/provision for legal settlement and fraud loss, WSFS Foundation contribution, and corporate development costs
 
(17,032
)
 
16,145

 
18

Plus: Tax adjustments: DTA writedown & BOLI surrender
 

 
22,452

 

(Plus)/less: Tax impact of pre-tax adjustments
 
4,071

 
(5,858
)
 
8

Non-GAAP net income
 
$
24,389

 
$
22,907

 
$
18,963

 
 
 
 
 
 
 
GAAP return on average assets (ROA)
 
2.20
 %
 
(0.56
)%
 
1.12
%
Plus (less): Pre-tax adjustments: Securities gains, unrealized gains, recovery of/provision for legal settlement and fraud loss, WSFS Foundation contribution, and corporate development costs
 
(1.01
)
 
0.92

 

Plus: Tax adjustments: DTA writedown & BOLI surrender
 

 
1.29

 

(Plus) less: Tax impact of pre-tax adjustments
 
0.24

 
(0.34
)
 

Core ROA (non-GAAP)
 
1.43
 %
 
1.31
 %
 
1.12
%
 
 
 
 
 
 
 
EPS (GAAP)
 
$
1.16

 
$
(0.31
)
 
$
0.59

Plus (less): Pre-tax adjustments: Securities gains, unrealized gains, recovery of/provision for legal settlement and fraud loss, WSFS Foundation contribution, and corporate development costs
 
(0.53
)
 
0.50

 

Plus: Tax adjustments: DTA writedown & BOLI surrender
 

 
0.70

 

(Plus) less: Tax impact of pre-tax adjustments
 
0.13

 
(0.18
)
 

Core EPS (non-GAAP)
 
$
0.76

 
$
0.71

 
$
0.59

 
 
 
 
 
 
 
Calculation of return on average tangible common equity:
 
 
 
 
GAAP net (loss) income
 
$
37,350

 
$
(9,832
)
 
$
18,937

Plus: Tax effected amortization of intangible assets
 
541

 
461

 
589

Net tangible income (non-GAAP)
 
$
37,891

 
$
(9,371
)
 
$
19,526

Average shareholders’ equity
 
$
725,714

 
$
751,950

 
$
698,474

Less: average goodwill and intangible assets
 
188,209

 
188,834

 
190,600

Net average tangible common equity
 
$
537,505

 
$
563,116

 
$
507,874

Return on average tangible common equity (non-GAAP)
 
28.59
 %
 
(6.60
)%
 
15.59
%
 
 
 
 
 
 
 
Calculation of core return on average tangible common equity:
 
 
 
 
 
 
Non-GAAP net income
 
$
24,389

 
$
22,907

 
$
18,963

Plus: Tax effected amortization of intangible assets
 
541

 
461

 
589

Core net tangible income (non-GAAP)
 
$
24,930

 
$
23,368

 
$
19,552

Net average tangible common equity
 
$
537,505

 
$
563,116

 
$
507,874

Core return on average tangible common equity (non-GAAP)
 
18.81
 %
 
16.46
 %
 
15.61
%