WSFS Financial Corporation
Apr 27, 2017

WSFS Reports 1Q 2017 EPS of $0.59, a 13% Increase Over 1Q 2016; Net Revenue Improves 18% Over 1Q 2016 Driven by Strong Organic and Acquisition Growth in Loans, Deposits, and Fee Income

WILMINGTON, Del., April 27, 2017 (GLOBE NEWSWIRE) -- WSFS Financial Corporation (NASDAQ:WSFS), the parent company of WSFS Bank, reported net income of $18.9 million, or $0.59 per diluted common share for 1Q 2017 compared to net income of $15.8 million, or $0.52 per share for 1Q 2016 and net income of $18.1 million, or $0.56 per share for 4Q 2016.

Reported results for 1Q 2017 included net revenues of $81.2 million, which increased $12.2 million, or 18% from 1Q 2016.  Net revenues included net interest income of $53.1 million, an increase of $7.7 million, or 17% from 1Q 2016 and noninterest income of $28.1 million, an increase of $4.4 million, or 19% from 1Q 2016.  Noninterest expenses were $51.5 million, an increase of $7.7 million, or 18% from 1Q 2016.  This resulted in an efficiency ratio of 62.9% in 1Q 2017 compared with 62.8% in 1Q 2016.

Highlights for 1Q 2017:

Core earnings per share(1) of $0.59 increased 11% from $0.53 in 1Q 2016. 

(1) Core earnings per share, core net revenue, core net interest income and core fee income are non-GAAP financial measures. For a reconciliation of these measures to their comparable GAAP measures, see "Non-GAAP Reconciliation" at the end of this press release.

Notable items in the quarter:

CEO outlook and commentary

Mark A. Turner, President and CEO, said, "Our first quarter results demonstrate continued success in executing on our strategic goals and optimization of our recent business combinations and investments. This success included strong organic growth in loans, core deposits, net revenues and fee income, and was achieved despite this being our normal seasonally slower quarter and a slowdown in the mortgage market.

"These results continue to lead us on a path of meeting or exceeding our current Strategic Plan goals, including a core and sustainable ROA goal of 1.30% by the fourth quarter of 2018.  Our first quarter results positively reflect the key focus areas of our Strategic Plan, including gaining market share, deepening customer relationships, growing fee income, and optimizing and innovating across our organization.  Innovation and organizational learning is vital to our long-term success, and we were pleased to announce during the quarter the extension of our fintech strategic alliance with Social Finance Inc. (SoFi) in conjunction with its acquisition of Zenbanx to explore partnering on innovative products in the financial services marketplace.

"During the quarter, we were also named a 'Top WorkPlace' in the greater Philadelphia market by philly.com. This is the third year in a row that we have been recognized and this year we earned a strong 3rd place in the mid-size company category, up from 8th in the small company category last year. This means a great deal to us as it affirms that our culture, brand and business model are taking hold in our newer markets in Pennsylvania. Our continued strong financial performance and market recognition are strong indicators that we are successfully executing our strategy, 'Engaged Associates delivering stellar experiences growing Customer Advocates and value for our Owners'."

First Quarter 2017 Discussion of Financial Results

Net interest income and margin reflects strong loan growth

Net interest income for 1Q 2017 was $53.1 million, an increase of $7.7 million, or 17% compared to 1Q 2016 due primarily to organic and acquisition-related loan growth. 

The net interest margin for 1Q 2017 was 3.90%, a 3 bps increase from 3.87% for 1Q 2016 despite an 8 bps decrease due to our issuance of $100.0 of million senior notes in 2Q 2016, the impact of which will be substantially recovered as we plan to use part of the proceeds to pay off older, higher-cost debt in 3Q 2017.  The year-over-year increase in the net interest margin reflects the positive impact of our combination with Penn Liberty, offset somewhat by higher funding costs to support the increase in Cash Connect®'s fee-based bailment business.

Net interest income and net interest margin for 1Q 2017 were essentially equal to results for 4Q 2016, as the positive effect of loan growth during the current quarter was offset by fewer days and lower acquisition-related accretion in the first quarter.

Loan Portfolio growth driven by organic and acquisition increases

At March 31, 2017, WSFS' net loan portfolio was $4.58 billion, an increase of $82.4 million, or 7% (annualized) compared to December 31, 2016.  The increase resulted from $101.6 million, or 11% (annualized) growth in total commercial loans and a $15.2 million, or 13% (annualized) increase in consumer loans partially offset by a $34.4 million decrease in residential mortgages, consistent with our strategy to sell most newly originated residential mortgages in the secondary market and lower residential loans held for sale at March 31, 2017. 

Compared to 1Q 2016, net loans increased $762.9 million, or 20%.  This increase includes the loans acquired from Penn Liberty and organic loan growth of $359.3 million, or 9%.  The majority of the year-over-year organic growth was in C&I loans, which increased $250.7 million, or 13%, consumer loans, which increased $66.0 million, or 18% and CRE loans, which increased $59.4 million, or 6%. These increases were partially offset by a decline in residential mortgages of $27.6 million, or 10%, again reflecting our strategy of selling most newly-originated residential mortgages in the secondary market.

The following table summarizes loan balances and composition at March 31, 2017 compared to December 31, 2016 and March 31, 2016:

(Dollars in thousands) March 31, 2017 December 31, 2016 March 31, 2016
Commercial & industrial $2,431,442  53% $2,364,399  52% $1,980,780  52%
Commercial real estate 1,158,221  25  1,156,542  26  980,045  26 
Construction 254,229  6  221,321  5  225,699  6 
Total commercial loans 3,843,892  84  3,742,262  83  3,186,524  84 
Residential mortgage 309,972  7  344,373  8  308,504  8 
Consumer 467,507  10  452,273  10  361,174  9 
Allowance for loan losses (39,826) (1) (39,751) (1) (37,556) (1)
Net Loans $4,581,545  100% $4,499,157  100% $3,818,646  100%

Credit quality

Although most credit quality metrics were generally stable during 1Q 2017, nonperforming assets increased as described further below.

Total problem loans (all criticized, classified and nonperforming loans) were essentially flat at $184.0 million, or 27.1% of Tier 1 capital plus the allowance for loan losses (ALLL) at March 31, 2017, compared to $183.7 million, or 27.7% at December 31, 2016.

Delinquencies (which includes nonperforming delinquencies) were $24.2 million at March 31, 2017, a low 0.53% of gross loans, representing a slight increase from $22.2 million and 0.50% of gross loans at December 31, 2016.

Total nonperforming assets were $60.5 million at March 31, 2017, a $19.7 million increase from December 31, 2016. The nonperforming assets to total assets ratio was 0.88% at March 31, 2017 compared to 0.60% at December 31, 2016. At March 31, 2017, nonperforming assets included the impact of a $9.7 million locally-based, C&I participation that was downgraded during the quarter after a review at the agent bank.  The loan relationship is current and resolution is expected in the near term with no impact to net charge-offs. The remaining increase in nonperforming assets was primarily due to three smaller C&I relationships (ranging from $1.7 to $3.5 million) that were moved to nonaccruing status during the quarter.  These relationships were from unrelated industries and resulted from specific events that caused weakness in the underlying business.  In each case, a comprehensive impairment analysis was completed and the results are included in the 1Q 2017 provision for loan losses.

Net charge-offs for 1Q 2017, were $2.1 million or only 0.19% of total net loans on an annualized basis, a decrease from $4.4 million, or 0.40% (annualized) in 4Q 2016, and an increase from $0.3 million, or 0.03% (annualized) during 1Q 2016. 

Total credit costs (provision for loan losses, loan workout expenses, other real estate owned (OREO) expenses and other credit reserves) were $2.8 million for 1Q 2017, a decrease from $5.9 million during 4Q 2016 and an increase from $1.3 million during 1Q 2016. 

The ratio of the ALLL to total gross loans was 0.87% at March 31, 2017, down slightly from 0.89% at December 31, 2016. Excluding the balances for acquired loans (marked-to-market at acquisition), the ALLL to total gross loans ratio would have been 1.04% at March 31, 2017 and 1.08% at December 31, 2016. The ALLL was 100% of nonaccruing loans at March 31, 2017 compared to 174% at December 31, 2016 and 190% at March 31, 2016.

Total customer funding reflects continued strength in core deposit accounts

Total customer funding was $5.10 billion at March 31, 2017, a $500.6 million increase from December 31, 2016.  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 increased a healthy $148.2 million, or 13% (annualized), compared to December 31, 2016. 

Customer funding increased $1.23 billion, or 32% compared to March 31, 2016, or $879.1 million excluding the aforementioned short-term trust deposit.  In addition to the short-term trust deposit and $574.8 million (fair market value) of deposits acquired from Penn Liberty, organic customer funding growth was $304.3 million, or 8%, including organic core deposit growth of $352.5 million, or 11% over the prior year, offset by purposeful run-off of higher-cost CDs.

Excluding the aforementioned short-term trust deposit, core deposits were 88% of total customer deposits, and no- and low-cost checking deposit accounts represent 47% of total customer deposits at March 31, 2017.  These core deposits predominantly represent longer-term, less price-sensitive customer relationships, which are very valuable in a rising-rate environment.  The loan to customer deposit ratio was 96% at March 31, 2017, excluding the short-term trust deposit. 

The following table summarizes customer funding balances and composition at March 31, 2017 compared to December 31, 2016 and March 31, 2016:

(Dollars in thousands) March 31, 2017 December 31, 2016 March 31, 2016
Noninterest demand $1,658,111  33% $1,266,306  28% $964,487  25%
Interest-bearing demand 932,284  18  935,333  20  786,780  20 
Savings 597,186  12  547,293  12  449,061  12 
Money market 1,342,464  26  1,257,520  27  1,107,421  29 
Total core deposits 4,530,045  89  4,006,452  87  3,307,749  86 
Customer time deposits 570,186  11  593,184  13  560,939  14 
Total customer deposits $5,100,231  100% $4,599,636  100% $3,868,688  100%

Fee income reflects strong growth over prior year

Core fee income (noninterest income) increased by $4.4 million, or 19%, to $27.8 million compared to 1Q 2016.  This was the result of growth across most of our businesses and included increases in investment management and fiduciary revenue of $2.8 million and credit/debit card and ATM income of $1.2 million.

When compared to 4Q 2016, core fee income was flat as declines in mortgage banking fee revenue (mainly due to rising rates and seasonality), fewer days in the first quarter and a seasonal decline in deposit service charges were offset by higher credit/debit card and ATM income and higher gain on sale of Small Business Administration (SBA) loans.

For 1Q 2017, core fee income was 34.3% of total revenue, a slight increase when compared to 34.0% for 1Q 2016, and was well diversified among various sources, including traditional banking, mortgage banking, wealth management and ATM services (Cash Connect®).

Noninterest expense reflects recent combinations and franchise growth

Core noninterest expense(2) for 1Q 2017 was $51.2 million, an increase of $8.0 million from $43.2 million in 1Q 2016.  Contributing to the year-over-year increase was $4.8 million of ongoing operating costs from our late 2016 combinations with Penn Liberty, Powdermill, and West Capital. The remaining increase reflects higher compensation and related costs due to added staff to support overall franchise growth.

When compared to 4Q 2016, core noninterest expense increased $3.7 million, primarily as a result of higher compensation and occupancy expenses. The increase in compensation and related expenses 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 tax caps during the first quarter, as well as the impact of a full quarter of operations from the recent combination with West Capital Management. These higher costs were partially offset by a decline in professional fees related to lower legal fees incurred during 1Q 2017.

(2) Core noninterest expense is a non-GAAP financial measure. For a reconciliation of this measure to its comparable GAAP measure, see "Non-GAAP Reconciliation" at the end of this press release.

Selected Business Segments (included in previous results):

Wealth Management segment fee revenue grew 49% 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, with $169.8 million in assets under management (AUM), provides insurance, asset management, and brokerage products primarily to our retail banking clients. Cypress Capital Management, LLC is a registered investment advisor with $774.3 million in AUM. Cypress is a fee-only wealth management firm offering a "balanced" investment style focused on preservation of capital and providing current income whose primary market segment is high net worth individuals. West Capital Management is a registered investment advisor with $779.5 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 $15.85 billion in assets under management and 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. WSFS Private Banking 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 $11.6 million for 1Q 2017. This was an increase of $2.8 million, or 32% compared to 1Q 2016 and was unchanged compared to 4Q 2016. Included in the year-over-year increase, fee revenue increased $2.7 million, or 49%, compared to 1Q 2016. The year-over-year increase reflects continued growth in several Wealth business lines in addition to the combinations with Powdermill Financial Solutions LLC, which occurred in mid-August 2016, and West Capital Management, which occurred in mid-October 2016.

Total noninterest expense (including intercompany allocations and provision for loan losses and credit costs) was $8.3 million during 1Q 2017 compared to $5.8 million during 1Q 2016 and $10.7 million during 4Q 2016. The year-over-year increase in costs was due primarily to the incentive compensation expense related to higher revenue, infrastructure costs necessary to support the growth of the business, higher loan loss provision in Private Banking and the added operational costs from the combinations with Powdermill and West Capital. In comparison with 4Q 2016, the decrease in expense was primarily due to a $3.5 million credit loss recognized in that quarter.

Pre-tax income in 1Q 2017 was $3.3 million compared to $2.9 million in 1Q 2016 and $0.9 million in 4Q 2016 and was driven by the above mentioned factors.

Cash Connect net revenue increases 7% over same quarter 2016

Cash Connect® is a premier provider of ATM vault cash and smart safe and cash logistics services in the United States. Cash Connect® services over 21,000  non-bank ATMs and retail safes nationwide with over $1.02 billion in cash.  Cash Connect® also operates over 440 ATMs for WSFS Bank, which has the largest branded ATM network in Delaware.

Our Cash Connect® division recorded $8.5 million in net revenue (fee income less funding costs) in 1Q 2017, an increase of $0.5 million or 7% from 1Q 2016, reflecting organic growth, albeit at lower margins. Net revenue decreased $0.1 million compared to 4Q 2016 due to normal seasonality. Noninterest expense (including intercompany allocations of expense) was $6.9 million during 1Q 2017, an increase of $0.7 million from 1Q 2016 and an increase of $0.5 million compared to 4Q 2016.  The increase in expenses was due to increased investments for several new services, features and product enhancements to our managed services and smart safe offerings. Cash Connect® reported pre-tax income of $1.6 million for 1Q 2017, which was a decrease of $0.1 million, or 8% from 1Q 2016 and a decrease of $0.6 million, or 28% when compared to 4Q 2016 driven by the aforementioned factors.

Cash Connect® continues to focus on value-added services to offset margin compression resulting from consolidation in the vault cash industry and improving our funding costs by optimizing cash usage while expanding funding from other banking partners. Cash Connect® has a growing smart safe pipeline being generated by several smart safe distribution partners that are actively marketing our program resulting in over 970 safes as of March 31, 2017, up from just over 100 safes at the end of 2015.

Income taxes

The Company recorded a $8.6 million income tax provision in 1Q 2017, compared to provisions of $9.1 million in 4Q 2016 and $8.7 million in 1Q 2016. 

The effective tax rate was 31.2% in 1Q 2017, 33.4% in 4Q 2016, and 35.5% in 1Q 2016.  The effective tax rate in 1Q 2017 decreased due to a greater tax benefit related to stock-based compensation activity during the quarter due to both the adoption of ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, Compensation — Stock Compensation (Topic 718) in 2Q 2016 and higher tax benefits realized on stock-based compensation in 1Q 2017, due to greater transaction volume and increases in the Company's stock price.

Capital management

WSFS' total stockholders' equity increased $16.7 million, or 2% (not annualized), to $704.0 million at March 31, 2017 from $687.3 million at December 31, 2016, primarily due to quarterly earnings offset modestly by the payment of common stock dividends and stock buybacks during the quarter.

WSFS' tangible common equity(3) increased by 4% (not annualized) to $513.6 million at March 31, 2017 from $496.1 million at December 31, 2016 due to the reasons noted in the paragraph above.  

WSFS' common equity to assets ratio was 10.27% at March 31, 2017, and its tangible common equity to tangible assets ratio(3) increased by 16 bps during the quarter to 7.71%. At March 31, 2017, book value per share was $22.38, a $0.48, or 2% (not annualized), increase from December 31, 2016, and tangible common book value per share(3) was $16.33, a $0.53, or 3% (not annualized), increase from December 31, 2016.

At March 31, 2017, WSFS Bank's Tier I leverage ratio of 9.60%, Common Equity Tier 1 capital ratio and Tier 1 capital ratio of 11.25%, and Total Capital ratio of 11.97%, were all substantially in excess of the "well-capitalized" regulatory benchmarks.

In 1Q 2017, WSFS repurchased 62,000 shares of common stock at an average price of  $45.41 as part of our 5% buyback program approved by the Board of Directors in 4Q 2015. WSFS has 892,194 shares, or nearly 3% of outstanding shares, remaining to repurchase under this current authorization. 

Finally, the Board of Directors approved a quarterly cash dividend of $0.07 per share of common stock. This dividend will be paid on May 26, 2017 to shareholders of record as of May 12, 2017.

(3) 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 "Non-GAAP Reconciliation" at the end of this press release.

First quarter 2017 earnings release conference call

Management will conduct a conference call to review 1Q 2017 results at 1:00 p.m. Eastern Time (ET) on Friday, April 28, 2017. Interested parties may listen to this call by dialing 1-877-312-5857. A rebroadcast of the conference call will be available two hours after the completion of the call until Friday, May 12, 2017, by dialing 1-855-859-2056 and using Conference ID 6852894.

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, 2017, WSFS Financial Corporation had $6.85 billion in assets on its balance sheet and $17.57 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.

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 market areas 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 any problem loans including litigation and other costs; changes in market interest rates which may increase funding costs and reduce earning asset yields thus reducing 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 changes in regulations affecting financial institutions, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations being 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; negative perceptions or publicity with respect to the Company's trust and wealth management business; 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 manmade disasters including terrorist attacks; possible changes in the speed of loan prepayments by the Company's customers and loan origination or sales volumes; possible acceleration of prepayments of mortgage-backed securities due to low interest rates, and the related acceleration of premium amortization on prepayments on mortgage-backed securities due to low interest rates; regulatory limits on the Company's ability to receive dividends from its subsidiaries and pay dividends to its shareholders; the effects of any reputational, 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, discussed in the Company's Form 10-K for the year ended December 31, 2016 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.

WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS
STATEMENTS OF OPERATIONS
(Unaudited) 
 
(Dollars in thousands, except per share data) Three months ended
  March 31, 2017  December 31, 2016  March 31, 2016 
Interest income:
Interest and fees on loans $54,681  $53,951  $44,562 
Interest on mortgage-backed securities 4,395  4,096  3,894 
Interest and dividends on investment securities 1,249  1,212  1,220 
Other interest income 501  433  370 
  60,826  59,692  50,046 
Interest expense:      
Interest on deposits 3,075  2,687  2,118 
Interest on senior debt 2,121  2,120  942 
Interest on Federal Home Loan Bank advances 1,858  1,310  1,048 
Interest on trust preferred borrowings 446  439  371 
Interest on other borrowings 223  182  211 
  7,723  6,738  4,690 
Net interest income 53,103  52,954  45,356 
Provision for loan losses 2,162  5,124  780 
Net interest income after provision for loan losses 50,941  47,830  44,576 
       
Noninterest income:      
Credit/debit card and ATM income 8,131  7,969  6,901 
Investment management and fiduciary revenue 8,039  8,081  5,254 
Deposit service charges 4,397  4,634  4,276 
Mortgage banking activities, net 1,185  1,409  1,654 
Loan fee income 549  567  477 
Investment securities gains, net 320  479  305 
Bank-owned life insurance income 276  222  231 
Other income 5,195  4,938  4,570 
  28,092  28,299  23,668 
Noninterest expense:      
Salaries, benefits and other compensation 28,836  24,794  22,876 
Occupancy expense 5,162  4,086  4,270 
Equipment expense 3,124  2,726  2,473 
Professional fees 1,635  2,251  2,403 
Data processing and operations expense 1,618  1,711  1,542 
Marketing expense 624  843  664 
FDIC expenses 529  526  838 
Corporate development expense 338  1,526  569 
Loan workout and OREO expense 521  622  503 
Other operating expenses 9,119  9,864  7,659 
  51,506  48,949  43,797 
Income before taxes 27,527  27,180  24,447 
Income tax provision 8,590  9,070  8,677 
Net income $18,937  $18,110  $15,770 
Diluted earnings per share of common stock:      
Net income allocable to common stockholders $0.59  $0.56  $0.52 
Weighted average shares of common stock outstanding for fully diluted EPS 32,348,571  32,280,897  30,228,788 
See "Notes" 


  Three months ended
  March 31, 2017 December 31, 2016 March 31, 2016
Performance Ratios:      
Return on average assets (a) 1.12% 1.08% 1.13%
Return on average equity (a) 11.00  10.37  10.65 
Return on average tangible common equity (a)(o) 15.59  14.82  13.05 
Net interest margin (a)(b) 3.90  3.90  3.87 
Efficiency ratio (c) 62.87  59.71  62.76 
Noninterest income as a percentage of total net revenue (b) 34.29  34.52  33.92 
See "Notes"         


WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS (Continued)
SUMMARY STATEMENTS OF CONDITION (Unaudited)
 
       
(Dollars in thousands) March 31, 2017 December 31, 2016 March 31, 2016
Assets:
Cash and due from banks $120,913  $119,929  $92,543 
Cash in non-owned ATMs 730,747  698,454  497,322 
Investment securities (d) 197,206  199,979  206,119 
Other investments 23,605  41,788  30,874 
Mortgage-backed securities (d) 755,530  758,910  735,555 
Net loans (e)(f)(l) 4,581,545  4,499,157  3,818,646 
Bank owned life insurance 101,700  101,425  90,439 
Goodwill and intangibles 190,372  191,247  94,572 
Other assets 151,281  154,381  118,924 
Total assets $6,852,899  $6,765,270  $5,684,994 
Liabilities and Stockholders' Equity:      
Noninterest-bearing deposits $1,658,111  $1,266,306  $964,487 
Interest-bearing deposits 3,442,120  3,333,330  2,904,201 
Total customer deposits 5,100,231  4,599,636  3,868,688 
Brokered deposits 276,599  138,802  200,083 
Total deposits 5,376,830  4,738,438  4,068,771 
Federal Home Loan Bank advances 298,095  854,236  707,826 
Other borrowings 402,754  413,211  263,438 
Other liabilities 71,219  72,049  47,379 
Total liabilities 6,148,898  6,077,934  5,087,414 
Stockholders' equity 704,001  687,336  597,580 
Total liabilities and stockholders' equity $6,852,899  $6,765,270  $5,684,994 
Capital Ratios:      
Equity to asset ratio 10.27% 10.16% 10.51%
Tangible common equity to tangible asset ratio (o) 7.71  7.55  9.00 
Common equity Tier 1 capital (g) (required: 4.5%; well capitalized: 6.5%) 11.25  11.19  12.16 
Tier 1 leverage (g) (required: 4.00%; well-capitalized: 5.00%) 9.60  9.66  10.50 
Tier 1 risk-based capital (g) (required: 6.00%; well-capitalized: 8.00%) 11.25  11.19  12.16 
Total Risk-based capital (g) (required: 8.00%; well-capitalized: 10.00%) 11.97  11.93  12.96 
Asset Quality Indicators:      
Nonperforming Assets:      
Nonaccruing loans $39,678  $22,876  $19,791 
Troubled debt restructuring (accruing) 17,260  14,336  13,909 
Assets acquired through foreclosure 3,582  3,591  3,979 
Total nonperforming assets $60,520  $40,803  $37,679 
Past due loans (h) $1,765  $438  $127 
Allowance for loan losses $39,826  $39,751  $37,556 
Ratio of nonperforming assets to total assets 0.88% 0.60% 0.66%
Ratio of nonperforming assets (excluding accruing TDRs) to total assets 0.63  0.39  0.42 
Ratio of allowance for loan losses to total gross loans (i)(n) 0.87  0.89  0.99 
Ratio of allowance for loan losses to nonaccruing loans 100  174  190 
Ratio of quarterly net charge-offs to average gross loans (a)(e)(i)(n) 0.19  0.40  0.03 
Ratio of year-to-date net charge-offs to average gross loans (a)(e)(i)(n) 0.19  0.25  0.03 
See "Notes"         


WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS (Continued)
AVERAGE BALANCE SHEET (Unaudited)
 
(Dollars in thousands) Three months ended
  March 31, 2017 December 31, 2016 March 31, 2016
  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 $1,392,925  $17,023  4.96% $1,354,359  $17,004  4.99% $1,192,711  $14,280  4.82%
Residential real estate loans 281,953  4,981  7.07  288,281  4,687  6.50  281,501  3,909  5.55 
Commercial loans 2,391,817  26,897  4.59  2,328,245  26,789  4.61  1,968,278  21,965  4.53 
Consumer loans 457,373  5,408  4.80  448,709  4,988  4.42  361,040  4,093  4.56 
Loans held for sale 41,092  372  3.62  57,432  483  3.36  32,891  315  3.83 
Total loans 4,565,160  54,681  4.87  4,477,026  53,951  4.81  3,836,421  44,562  4.69 
Mortgage-backed securities (d) 759,159  4,395  2.32  763,379  4,096  2.15  711,352  3,894  2.19 
Investment securities (d) 228,841  1,249  3.17  200,517  1,212  3.49  203,665  1,220  3.54 
Other interest-earning assets 42,910  501  4.67  36,418  433  4.76  30,558  370  4.87 
Total interest-earning assets 5,596,070  60,826  4.46% 5,477,340  59,692  4.39% 4,781,996  50,046  4.27%
Allowance for loan losses (40,556)     (39,720)     (37,544)    
Cash and due from banks 145,712      127,583      93,998     
Cash in non-owned ATMs 683,138      653,662      452,052     
Bank owned life insurance 101,522      101,733      90,290     
Other noninterest-earning assets 348,582      324,679      215,201     
Total assets $6,834,468      $6,645,277      $5,595,993     
Liabilities and Stockholders' Equity:                  
Interest-bearing liabilities:                  
Interest-bearing deposits:                  
Interest-bearing demand $919,456  $385  0.17% $925,853  $331  0.14% $766,209  $245  0.13%
Money market 1,323,969  1,026  0.31% 1,273,868  968  0.30  1,098,595  749  0.27 
Savings 574,252  213  0.15% 548,669  220  0.16  443,822  139  0.13 
Customer time deposits 581,547  1,090  0.76% 577,834  934  0.64  574,422  745  0.52 
Total interest-bearing customer deposits 3,399,224  2,714  0.32% 3,326,224  2,453  0.29  2,883,048  1,878  0.26 
Brokered deposits 175,789  361  0.83% 148,127  234  0.63  166,974  241  0.58 
Total interest-bearing deposits 3,575,013  3,075  0.35% 3,474,351  2,687  0.31  3,050,022  2,119  0.28 
FHLB of Pittsburgh advances 866,780  1,858  0.87% 786,171  1,310  0.66  674,247  1,048  0.63 
Trust preferred borrowings 67,011  446  2.70% 67,011  439  2.61  67,011  371  2.23 
Senior Debt 152,103  2,121  5.58% 151,966  2,120  5.58  53,741  942  7.01 
Other borrowed funds 142,292  223  0.64% 133,037  182  0.54  155,011  210  0.54 
Total interest-bearing liabilities 4,803,199  7,723  0.65% 4,612,536  6,738  0.58% 4,000,032  4,690  0.47%
Noninterest-bearing demand deposits 1,255,950      1,271,373      949,607     
Other noninterest-bearing liabilities 76,845      66,580      54,307     
Stockholders' equity 698,474      694,788      592,047     
Total liabilities and stockholders' equity $6,834,468      $6,645,277      $5,595,993     
Excess of interest-earning assets over interest-bearing liabilities $792,871      $864,804      $781,964     
Net interest and dividend income   $53,103      $52,954      $45,356   
                   
Interest rate spread     3.81%     3.81%     3.80%
                   
Net interest margin(o)     3.90%     3.90%     3.87%
See "Notes"


WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS (Continued)
(Unaudited)
   
(Dollars in thousands, except per share data) Three months ended
Stock Information: March 31, 2017 December 31, 2016 March 31, 2016
Market price of common stock:      
High $48.20 $47.64 $33.71
Low 43.25 31.90 26.40
Close 45.95 46.35 32.52
Book value per share of common stock 22.38 21.90 20.24
Tangible common book value per share of common stock (o) 16.33 15.80 17.04
Number of shares of common stock outstanding (000s) 31,458 31,390 29,522
Other Financial Data:      
One-year repricing gap to total assets (k) 1.15% (4.14)% 1.86%
Weighted average duration of the MBS portfolio 5.3 years 5.4 years 4.1 years
Unrealized (losses) gains on securities available-for-sale, net of taxes $(7,145) $(8,194) $8,496
Number of Associates (FTEs) (m) 1,138 1,116 948
Number of offices (branches, LPO's, operations centers, etc.) 77 77 63
Number of WSFS owned ATMs 446 446 442


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 18 and 19 of this press release.


WSFS FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
 
Non-GAAP Reconciliation (o): Three months ended
  March 31, 2017 December 31, 2016 March 31, 2016
Net interest income (GAAP) $
53,103  $52,954  $45,356 
Core net interest income (non-GAAP) 53,103  52,954  45,356 
Noninterest Income (GAAP) 28,092  28,299  23,668 
Less: Securities gains 320  479  305 
Core fee income (non-GAAP) 27,772  27,820  23,363 
Core net revenue (non-GAAP) $80,875  $80,774  $68,719 
Core net revenue (non-GAAP)(tax-equivalent) $81,607  $81,494  $69,477 
Noninterest expense (GAAP) 51,506  48,949  43,797 
Less: Corporate development costs 338  1,526  569 
Core noninterest expense (non-GAAP) $51,168  $47,423  $43,228 
Core efficiency ratio (c) 62.7% 58.2% 62.2%
       
  End of period
  March 31, 2017 December 31, 2016 March 31, 2016
Total assets $6,852,899  $6,765,270  $5,684,994 
Less: Goodwill and other intangible assets 190,372  191,247  94,572 
Total tangible assets $6,662,527  $6,574,023  $5,590,422 
Total stockholders' equity $704,001  $687,336  $597,580 
Less: Goodwill and other intangible assets 190,372  191,247  94,572 
Total tangible common equity (non-GAAP) $513,629  $496,089  $503,008 
Calculation of tangible common book value per share:    
Book value per share (GAAP) $22.38  $21.90  $20.24 
Tangible common book value per share (non-GAAP) 16.33  15.80  17.04 
Calculation of tangible common equity to tangible assets:    
Equity to asset ratio (GAAP) 10.27% 10.16% 10.51%
Tangible common equity to tangible assets ratio (non-GAAP) 7.71% 7.55% 9.00%


  Three months ended
 March 31, 2017 December 31, 2016 March 31, 2016
GAAP net income $18,937  $18,110  $15,770 
Pre-tax adjustments: Sec. gains, corp. dev. costs, & FHLB dividend 18  1,047  264 
Tax impact of adjustments 8  (315) (23)
Non-GAAP net income $18,963  $18,842  $16,011 
Return on average assets (ROA) 1.12% 1.08% 1.13%
Pre-tax adjustments: Sec. gains, corp. dev. costs, & FHLB dividend   0.06  0.01 
Tax impact of adjustments   (0.02)  
Non-GAAP ROA 1.12% 1.12% 1.14%
GAAP EPS $0.59  $0.56  $0.52 
Pre-tax adjustments: Sec. gains, corp. dev. costs, & FHLB dividend   0.03  0.01 
Tax impact of adjustments   (0.01)  
Core EPS (non-GAAP) $0.59  $0.58  $0.53 
Calculation of return on average tangible common equity:    
GAAP net income $18,937  $18,110  $15,770 
Plus: Tax effected amortization of intangible assets 589  808  355 
Net tangible income (non-GAAP) $19,526  $18,918  $16,125 
Average shareholders' equity $698,474  $694,788  $592,047 
Less: average goodwill and intangible assets 190,600  186,890  95,074 
Net average tangible equity $507,874  $507,898  $496,973 
Return on average tangible common equity (non-GAAP) 15.59% 14.82% 13.05%


Investor Relations Contact:
Dominic Canuso
(302) 571-6833
dcanuso@wsfsbank.com
 	 	
Media Contact:
Cortney Klein
(302) 571-5253
cklein@wsfsbank.com