Market Overview

WSFS Reports 3Q 2016 EPS of $0.41; Results Impacted by Acquisition Costs and Active Credit Management; Net Revenue Grows 21% Driven by Strong Loan, Deposit and Fee Growth; Board Approves a 17% Increase in Cash Dividend

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WILMINGTON, Del., Oct. 27, 2016 (GLOBE NEWSWIRE) -- WSFS Financial Corporation (NASDAQ: WSFS), the parent company of WSFS Bank, reported net income of $12.7 million, or $0.41 per diluted common share for 3Q 2016 compared to net income of $14.4 million, or $0.51 per share for 3Q 2015 and net income of $17.5 million, or $0.58 per share for 2Q 2016.

Net income for the first nine months of 2016 grew $6.4 million, or 16%, to $46.0 million, or $1.50 per diluted common share, from $39.5 million, or $1.39 per share for the same period of 2015 resulting in EPS growth of $0.11 per share, or 8%.

Results for 3Q 2016 compared to 3Q 2015 reflect net revenues of $75.9 million, an increase of $13.2 million, or 21%, net interest income of $49.0 million, or an increase of $8.0 million, noninterest income of $26.8 million, or an increase of $5.2 million and noninterest expenses of $50.5 million, or an increase of $11.8 million.  The increase in noninterest expenses includes higher one-time corporate development costs as enumerated below. 

Highlights for 3Q 2016:

  • Successfully completed the acquisitions of Penn Liberty Financial Corp ("Penn Liberty") and Powdermill Financial Solutions LLC ("Powdermill") during the quarter.  Recently announced the acquisition of West Capital Management ("West Capital") in October 2016.
     
  • Core net revenue(1) increased $12.2 million, or 20% from 3Q 2015, including an $8.0 million, or 20% increase in core net interest income(1) and a $4.2 million, or 20% increase in core fee income(1), reflecting strong organic and acquisition growth.
     
  • Core noninterest expenses(1) increased $6.8 million, or 18% from 3Q 2015, creating 2 points of positive operating leverage resulting in an efficiency ratio of 65.9%, or a core efficiency ratio(1) of 59.0%.
     
  • Net loans grew $574.4 million, including organic loan growth of $101.3 million or 11% (annualized) over June 30, 2016; the remainder of the loan growth was attributable to the successful Penn Liberty acquisition during the quarter.  

  • Customer deposits grew $756.0 million, including organic growth of $181.2 million or 19% (annualized) during the quarter.

(1) Core net revenue, core net interest income, core fee income, core noninterest expenses and core efficiency ratio are non-GAAP financial measures. A reconciliation of these measures to their comparable GAAP measures is included at the end of this press release.

Notable items in the quarter:

  • WSFS recorded $5.9 million (pre-tax) or $0.12 per share (after-tax) in expenses from corporate development activities during 3Q 2016, related to the successful acquisitions of Penn Liberty and Powdermill and the ongoing acquisition costs of West Capital.  WSFS recorded $0.9 million, or $0.02 per share in corporate development costs in 3Q 2015. 

  • WSFS realized $1.0 million, or $0.02 per share in net gains on securities sales from its investment portfolio during 3Q 2016, compared to $0.1 million or well less than $0.01 per share in 3Q 2015. 
     
  • A $15.4 million substandard C&I loan relationship was exited during 3Q 2016 resulting in a $4.2 million charge-off and $3.0 million in incremental loan loss provision in the quarter, or a $0.06 per share negative impact.  This was our largest, longstanding problem loan and had been reported as delinquent multiple times over the past several years. 

CEO outlook and commentary:
Mark A. Turner, President and CEO, said, "During the quarter we successfully completed our combination with Penn Liberty and Powdermill Financial Solutions, as well announcing our acquisition of West Capital in October, and we warmly welcome our new Customers and Associates to WSFS Bank. 

"Our third quarter results were impacted by active credit management and the costs from our strategic acquisitions during and shortly after the quarter.  Excluding these discrete costs, our third quarter results reflect solid fundamental performance and continue to reflect the success of our balanced growth strategy. We continue to see increases in net interest income driven by robust growth in our loan portfolio. We have also seen strong growth in our fee income driven by our bank-related businesses of Wealth Management, Cash Connect, and mortgage banking. Expenses were well managed as our third quarter results showed positive core operating leverage and a lower core efficiency ratio when compared to the same period last year. 

"Further, during the quarter we ranked highly in The Wilmington News Journal's ‘2016 Top Workplaces' survey for the eleventh consecutive year, and we were named the ‘Top Bank' in Delaware for the sixth year in a row. In addition, we were recognized in prominent banking industry publications and investment firm performance ratings based on a variety of metrics (EPS, loan and deposit growth, ROE and level of nonperforming assets) that ultimately drive increased shareholder value. Each of these recognitions mean a lot to us; combined they mean even more. They tell us our business model is working and affirm our strategy:  ‘Engaged Associates delivering Stellar Experiences growing Customer Advocates and value for our Owners'."

Third Quarter 2016 Discussion of Financial Results

Net interest income and margin reflect both acquisition-related and organic growth
Net interest income for 3Q 2016 was $49.0 million, an increase of $8.0 million, or 20% compared to 3Q 2015 due primarily to loan growth, both organic and acquisition-related. 

Net interest margin for 3Q 2016 was 3.84% compared to 3.79% for 3Q 2015.  The increase included a partial quarter impact from the acquisition of Penn Liberty which added approximately 4 basis points ("bps") of margin, split nearly even between purchase related accretion and the combination of their banking franchise.  In addition the increase also included 7bps from the Alliance acquisition which was mostly due to purchase related accretion.

The 3Q 2016 margin includes a 9bps decrease from increased interest expense associated with the $100.0 million in aggregate principal amount of 4.50% fixed-to-floating rate senior unsecured notes issued in late in 2Q 2016.  The net proceeds from the offering will be used for general corporate purposes, including the redemption of higher-cost indebtedness, organic growth, small fee-based acquisitions and repurchases of common stock. 

Compared with 2Q 2016, net interest income increased $2.6 million or 6% (not annualized), primarily as a result of strong organic and acquisition loan growth.  Net interest margin decreased 6bps compared to 2Q 2016 and reflected the full quarter impact of the debt offering discussed above.

Loan portfolio growth driven by organic and acquisition increases
At September 30, 2016, WSFS' net loan portfolio increased $574.4 million, or 15% (not annualized), to $4.4 billion when compared to June 30, 2016. Included in this increase was $473.1 million (fair market value) of loans acquired from Penn Liberty.  In addition to the acquired loans, organic loan growth of $101.3 million, or 11% (annualized) during the quarter, was the result of growth among nearly all loan categories.  The growth included an 8% (annualized) increase in C&I loans ($41.6 million), a 15% (annualized) increase in Commercial real estate loans ($37.0 million), and a 14% (annualized) increase in Consumer loans ($13.8 million). 

Compared to 3Q 2015, net loans increased $1.1 billion, or 31%.  This increase includes the loans acquired from Alliance Bank and Penn Liberty and continued healthy organic growth of $299.9 million, or 9%.

The following table summarizes loan balances and composition at September 30, 2016, June 30, 2016 and September 30, 2015:

    
(Dollars in Thousands)At
September 30, 2016
At
June 30, 2016
At
September 30, 2015
Commercial & industrial$ 2,325,001  53 %$ 2,044,802  53 %$ 1,748,042  52 % 
Commercial real estate  1,146,589  26    983,116  26    868,002  26   
Construction  207,532  5    197,461  5    201,596  6   
Total commercial loans  3,679,122  84    3,225,379  84    2,817,640  84   
Residential mortgage  328,049  7    269,928  7    234,368  7   
Consumer  440,082  10    376,304  10    342,403  10   
Allowance for loan losses  (39,028) (1)   (37,746) (1)   (36,412) (1)  
Net Loans$ 4,408,225  100 %$ 3,833,865  100 %$ 3,357,999  100 % 
                          

Credit quality
Overall credit quality metrics remained stable during 3Q 2016.  These metrics were impacted by the resolution of the large C&I relationship discussed above which resulted in a $4.2 million charge-off and $3.0 million in incremental loan loss provisions during the quarter.

Delinquencies increased $9.4 million from June 30, 2016 to $34.1 million, but remained a low 0.78% of gross loans (which includes nonperforming delinquencies) at September 30, 2016.  However, delinquencies included one $6.9 million relationship that became past due during 3Q 2016 and paid-off in-full subsequent to quarter-end. Delinquencies without this loan would have been $27.4 million, or 0.62% of gross loans. 

Total problem loans (all criticized, classified and nonperforming loans) were 29.0% of Tier 1 capital plus ALLL during the quarter compared to 24.2% at June 30, 2016.  This increase included the downgrade of a few discrete loans during the quarter and the addition of assets from our acquisition of Penn Liberty.  Additionally, the Bank's ratio of classified assets to total Tier 1 capital plus ALLL was 17.9%, an improvement from 18.6% at June 30, 2016 reflecting modest migration, more than offset by the divestiture of the large problem loan.

Total nonperforming assets were $40.6 million at September 30, 2016, a $9.0 million, or 29% (not annualized) increase from June 30, 2016, almost exclusively driven by three new nonaccrual loans added in the quarter. The nonperforming assets to total assets ratio remained low at 0.61% at September 30, 2016, compared to 0.54% at June 30, 2016.

Net charge-offs for 3Q 2016, including the aforementioned one large problem loan, were $4.6 million or 0.44% of total net loans on an annualized basis, an increase from $1.1 million, or 0.11% (annualized) in 2Q 2016, and a decrease from $5.9 million, or 0.70% (annualized), in 3Q 2015. Excluding the impact of this loan, net charge-offs for the quarter were $0.4 million.

Total credit costs (provision for loan losses, loan workout expenses, OREO expenses and other credit reserves) were $6.3 million for 3Q 2016, an increase from $1.3 million during 2Q 2016 and $1.6 million from 3Q 2015, with nearly half of the 3Q 2016 credit costs resulting from the resolution of the aforementioned problem loan during the quarter.

The ratio of the allowance for loan losses ("ALLL") to total gross loans declined to 0.89% at September 30, 2016, compared to 0.98% at June 30, 2016, as a result of the acquired loans from Penn Liberty. Excluding the balances for acquired loans (marked-to-market at acquisition), the ALLL to total gross loans ratio would have been 1.10% at September 30, 2016 and 1.09% at June 30, 2016. The ALLL was 168% of nonaccruing loans at September 30, 2016 compared to 259% at June 30, 2016.

Total customer deposits reflects continued strength in relationship accounts
Total customer deposits increased by $756.0 million, or 20% (not annualized) from June 30, 2016, which included $574.8 million (fair market value) of deposits acquired from Penn Liberty.  Excluding these deposits, organic customer deposit growth was $181.2 million, or 19% (annualized) from June 30, 2016 including an $81.6 million increase in public funding accounts, which is seasonal.  The remaining organic growth of $99.6 million, or 10% (annualized), was mainly in low-cost relationship checking deposit and money market accounts.

Compared to September 30, 2015, customer deposits increased $1.2 billion, or 34%.  In addition to the $312.6 million and $574.8 million (fair market value) of deposits acquired from Alliance and Penn Liberty, respectively, organic customer deposit growth was $280.6 million, or 8% year-over-year. 

Core deposits now represent 87% of total customer deposits, and low-cost relationship checking deposit accounts represent 48% of total customer deposits.  The loan to customer deposit ratio was 96% at September 30, 2016.

The following table summarizes customer deposit balances and composition at September 30, 2016 compared to prior periods:          

 
(Dollars in Thousands)At
September 30, 2016
At
June 30, 2016
At
September 30, 2015
Noninterest demand$1,245,12727%$977,15425%$904,89627% 
Interest–bearing demand 967,24821  796,29421  727,81621  
Savings 538,09312  427,84311  388,21311  
Money market 1,251,31527  1,091,30529  1,015,98530  
Total core deposits 4,001,78387  3,292,59686  3,036,91089  
Customer time deposits 587,21713  540,41714  384,11011  
Total customer deposits$4,589,000100%$3,833,013100%$3,421,020100% 
              

Fee income reflects strong growth over prior year
Core fee income increased by $4.2 million, or 20% (not annualized), to $25.8 million compared to 3Q 2015.  This was the result of growth in both banking and banking-related businesses and included increases in mortgage banking activities of $1.3 million, credit/debit card and ATM income of $1.3 million and investment management and fiduciary revenue of $0.7 million.

When compared to 2Q 2016, core fee income increased $1.5 million, or 6% (not annualized) primarily due to a $0.7 million increase in mortgage banking activities and a $0.5 million increase in credit/debit card and ATM income.

For 3Q 2016, fee income is 35.0% of total revenue compared to 34.5% for 2Q 2016 and is well diversified among various sources: traditional banking, mortgage banking, wealth management and ATM services (Cash Connect), as well as additional securities gains during 3Q 2016.

Noninterest expense reflects franchise growth and ongoing expense management
Core noninterest expense for 3Q 2016 was $44.6 million, an increase of $6.8 million from $37.9 million in 3Q 2015.  Contributing to the year-over-year increase was $2.5 million of ongoing operating costs from the addition of the Alliance, Penn Liberty, and Powdermill franchises. The remaining increase reflects higher compensation and related infrastructure costs due to added staff to support the significant organic and acquisition growth as well as increased performance-based incentive costs.

When compared to 2Q 2016, core noninterest expense increased $1.1 million, primarily as a result of operating costs of $1.4 million related to Penn Liberty and higher loan workout and OREO expense of $0.5 million in 3Q 2016.  The quarter over quarter comparison was also impacted by a $1.0 million legal reserve recorded in 2Q 2016. 

Selected Business Segments (included in previous results): 

Wealth Management segment fee revenue grew 13% over the prior year
The Wealth Management segment provides a broad array of fiduciary, investment management, credit and deposit products to clients through five businesses.  WSFS Wealth Investments provides insurance and brokerage products primarily to our retail banking clients.  Cypress Capital Management, LLC is a registered investment advisor with approximately $683 million in assets under management (AUM).  Cypress' primary market segment is high net worth individuals, offering a "balanced" investment style focused on preservation of capital and providing for current income.  Christiana Trust, with $13.6 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 through a coordinated, centralized approach.  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 $9.3 million for 3Q 2016.  This represented an increase of $0.7 million, or 8% compared to 3Q 2015 and a decrease of $0.2 million, or 3% (not annualized) compared to 2Q 2016.  Included in the year-over-year increase, fee revenue increased $0.7 million, or 13%, compared to 3Q 2015.  The year-over-year increase reflects continued growth in several Wealth business lines with particular strength in bankruptcy administration and corporate trust services in addition to the combination with Powdermill Financial Solutions LLC which occurred in August 2016. 

Total noninterest expense (including intercompany allocations and provision for loan losses and credit costs) was $6.1 million during 3Q 2016 compared to $5.9 million during 3Q 2015 and $6.1 million during 2Q 2016.  The year-over-year increase in costs was due primarily to increased incentive compensation expense due to higher revenue and other infrastructure costs necessary to support the growth of the Wealth Management business as well as additional ongoing operational costs from Powdermill.

Pre-tax income in 3Q 2016 was $3.2 million compared to $2.7 million in 3Q 2015 and $3.4 million in 2Q 2016 and was driven by the above mentioned factors.

Cash Connect results reflect 16% growth over 2015
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 20,000 non-bank ATMs and smart safes nationwide with over $890 million in cash and also operates over 440 ATMs for WSFS Bank, which has the largest branded ATM network in Delaware.

Our Cash Connect® division recorded $8.1 million in net revenue (fee income less funding costs) in 3Q 2016, an increase of $1.1 million or 16% from 3Q 2015, reflecting continued organic growth. Net revenue increased $0.4 million compared to 2Q 2016. Noninterest expense (including intercompany allocations of expense) was $5.8 million during 3Q 2016, an increase of $0.9 million from 3Q 2015 and an increase of $0.2 million compared to 2Q 2016.  Cash Connect® reported pre-tax income of $2.3 million for 3Q 2016, which was an increase of $0.2 million, or 10% from 3Q 2015. Third quarter 2016 pre-tax income increased $0.1 million, or 6% from $2.2 million when compared to 2Q 2016.

Cash Connect has experienced significant year-over-year fee income growth resulting from the expansion of its core business offerings of ATM Vault Cash and related Total Cash Management services. This growth has been driven by expanding our relationships with some of the largest independent ATM deployers in the United States.  Our Cash Connect division is also realizing strong growth with its new smart safe cash logistics offering, which is an added source of fee income.  Cash Connect has a growing smart safe pipeline being generated by four national smart safe distribution partners that are actively marketing our program.

Income taxes
The Company recorded a $6.8 million income tax provision in 3Q 2016, compared to $8.5 million in 2Q 2016 and an $8.1 million tax provision in 3Q 2015. 

The effective tax rate was 34.9% in 3Q 2016, 32.7% in 2Q 2016 and 35.9% in 3Q 2015.  The 2Q 2016 effective rate was impacted by the tax benefit resulting from the adoption of new accounting guidance related to stock based compensation.  The effective tax rate in 3Q 2016 decreased when compared to 3Q 2015 due to the ongoing impact of the new stock based compensation guidance along with increased tax-exempt municipal bond and BOLI income.

Capital management
WSFS' total stockholders' equity increased $74.8 million, or 12% (not annualized), to $692.0 million at September 30, 2016 from $617.2 million at June 30, 2016, primarily due to the stock issued in conjunction with the acquisition of Penn Liberty and quarterly earnings. Partially offsetting these increases was the payment of common stock dividends and stock buybacks during the quarter.

WSFS' tangible common equity(2) decreased by 1% (not annualized) to $519.3 million at September 30, 2016 from $523.1 million at June 30, 2016. WSFS' common equity to assets ratio was 10.44% at September 30, 2016, and its tangible common equity to asset ratio(2) decreased by 106bps during the quarter to 8.05%. Book value per share was $22.08 at September 30, 2016, and tangible common book value per share(2) was $16.57 at September 30, 2016, a $1.13, or 6% (not annualized), decrease from June 30, 2016. The decreases in the tangible common equity to assets ratio and tangible common book value per share reflect the impact of the two acquisitions completed during the quarter.

At September 30, 2016, WSFS Bank's Tier I leverage ratio of 10.05%, Common Equity Tier 1 capital ratio and Tier 1 capital ratio of 11.14%, and Total Capital ratio of 11.88%, were all substantially in excess of the "well-capitalized" regulatory benchmarks.

In 3Q 2016, WSFS repurchased 50,000 shares of common stock at an average price of $37.80 as part of our 5% buyback program approved by the Board of Directors during 4Q 2015. WSFS has 991,194 shares, or over 3% of outstanding shares, remaining to repurchase under this current authorization.

Finally, the Board of Directors approved a 17% increase in our quarterly cash dividend to $0.07 per share of common stock. This dividend will be paid on November 25, 2016 to shareholders of record as of November 11, 2016.

(2) Tangible common equity, tangible common equity to asset ratio and tangible common book value per share are non-GAAP financial measures. A reconciliation of these measures to their comparable GAAP measures is included at the end of this press release.

Third quarter 2016 earnings release conference call
Management will conduct a conference call to review third quarter 2016 results at 1:00 p.m. Eastern Time (ET) on Friday, October 28, 2016.  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 November 11, 2016, by dialing 1-855-859-2056 and using Conference ID 95231736.

About WSFS Financial Corporation
WSFS Financial Corporation is a multi-billion dollar financial services company. Its primary subsidiary, WSFS Bank, is the oldest locally-managed bank and trust company headquartered in Delaware and the Delaware Valley. As of September 30, 2016, WSFS Financial Corporation had $6.6 billion in assets on its balance sheet and $14.3 billion in fiduciary assets. WSFS operates from 76 offices located in Delaware (46), Pennsylvania (28), 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, Powdermill Financial Solutions, LLC, 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 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, 2015 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
(Dollars in thousands, except per share data) Three months ended Nine months ended 
(Unaudited)September 30, June 30, September 30, September 30, September 30, 
 2016  2016 2015 2016  2015 
Interest income: 
Interest and fees on loans$ 48,546  $44,505 $38,437 $ 136,568  $111,771 
Interest on mortgage-backed securities  3,854   3,910  3,588   11,658   10,544 
Interest and dividends on investment securities  1,214   1,226  875   3,660   2,587 
Interest on reverse mortgage loans  1,303   1,478  1,561   3,826   3,963 
Other interest income  420   384  396   1,174   1,898 
   55,337   51,503  44,857   156,886   130,763 
Interest expense:               
Interest on deposits  2,412   2,204  1,587   6,734   5,354 
Interest on Federal Home Loan Bank advances  1,225   1,124  868   3,397   2,332 
Interest on trust preferred borrowings  415   397  343   1,183   1,009 
Interest on senior debt  2,119   1,175  942   4,236   2,825 
Interest on other borrowings  145   189  120   545   339 
   6,316   5,089  3,860   16,095   11,859 
Net interest income  49,021   46,414  40,997   140,791   118,904 
Provision for loan losses  5,828   1,254  1,453   7,862   6,012 
Net interest income after provision for loan losses  43,193   45,160  39,544   132,929   112,892 
                
Noninterest income:               
Credit/debit card and ATM income  7,776   7,253  6,486   21,930   18,975 
Investment management and fiduciary revenue  6,074   6,282  5,373   17,610   16,173 
Deposit service charges  4,482   4,342  4,338   13,100   12,342 
Mortgage banking activities, net  2,555   1,816  1,251   6,025   4,544 
Loan fee income  542   480  405   1,499   1,337 
Investment securities gains, net  1,040   545  76   1,890   1,004 
Bank-owned life insurance income  255   211  162   697   544 
Other income  4,125   3,920  3,574   12,017   10,299 
   26,849   24,849  21,665   74,768   65,218 
Noninterest expense:               
Salaries, benefits and other compensation  24,804   23,509  20,784   71,189   62,139 
Occupancy expense  4,335   3,955  3,757   12,560   11,272 
Equipment expense  2,653   2,516  2,059   7,642   6,100 
Professional fees  1,554   2,934  2,039   6,891   5,264 
Data processing and operations expense  1,500   1,522  1,570   4,564   4,451 
Marketing expense  712   801  619   2,177   2,210 
FDIC expenses  469   773  786   2,080   2,142 
Corporate development expense  5,885   549  855   7,003   2,137 
Loan workout and OREO expense  511   45  166   1,059   495 
Other operating expenses  8,074   7,423  6,070   22,558   20,062 
   50,497   44,027  38,705   137,723   116,272 
Income before taxes  19,545   25,982  22,504   69,974   61,838 
Income tax provision  6,823   8,504  8,078   24,004   22,289 
Net income$ 12,722  $17,478 $14,426 $ 45,970  $39,549 
Diluted earnings per share of common stock (p):               
Net income allocable to common stockholders$ 0.41  $0.58 $0.51 $1.50  $1.39 
Weighted average shares of common stock outstanding for
fully diluted EPS
 31,317,312   30,150,904  28,231,895  30,661,225   28,502,847 
                
Performance Ratios:               
Return on average assets (a)  0.82 % 1.23% 1.14%  1.05 % 1.06%
Return on average equity (a)  7.66   11.60  11.41   9.91   10.44 
Return on tangible common equity (a) (p)  9.69   13.97  13.02   12.19   12.05 
Net interest margin (a)(b)  3.84   3.90  3.79   3.87   3.77 
Efficiency ratio (c)  65.91   61.14  61.24   63.23   62.61 
Noninterest income as a percentage of total net revenue (b)  35.04   34.51  34.28   34.33   35.12 
See "Notes"               
                


  
WSFS FINANCIAL CORPORATION  
FINANCIAL HIGHLIGHTS (Continued)         
SUMMARY STATEMENTS OF CONDITION         
(Dollars in thousands)         
(Unaudited)September 30, June 30, September 30, 
 2016  2016 2015 
Assets:         
Cash and due from banks$ 119,159  $104,507 $94,756 
Cash in non-owned ATMs  694,022   599,114  434,044 
Investment securities (d)  200,642   205,625  169,167 
Other investments  37,003   38,754  28,180 
Mortgage-backed securities (d)  742,073   727,232  725,624 
Net loans (e)(f)(l)  4,408,225   3,833,865  3,357,999 
Reverse mortgage loans  23,120   25,263  24,476 
Bank owned life insurance  101,185   91,491  77,053 
Goodwill and intangibles  172,709   94,073  56,339 
Other assets  129,455   114,183  100,304 
Total assets$ 6,627,593  $5,834,107 $5,067,942 
Liabilities and Stockholders' Equity:         
Noninterest-bearing deposits$ 1,245,127  $977,154 $904,896 
Interest-bearing deposits  3,343,873   2,855,859  2,516,124 
Total customer deposits  4,589,000   3,833,013  3,421,020 
Brokered deposits  144,639   159,126  223,582 
Total deposits  4,733,639   3,992,139  3,644,602 
          
Federal Home Loan Bank advances  817,167   886,767  643,027 
Other borrowings  327,540   282,035  225,352 
Other liabilities  57,237   55,970  49,344 
          
Total liabilities  5,935,583   5,216,911  4,562,325 
          
Stockholders' equity  692,010   617,196  505,617 
          
Total liabilities and stockholders' equity$ 6,627,593  $5,834,107 $5,067,942 
          
          
Capital Ratios:         
Equity to asset ratio  10.44 % 10.58% 9.98%
Tangible common equity to asset ratio (p)  8.05   9.11  8.96 
Common equity Tier 1 capital (g) (required: 4.5%; well capitalized: 6.5%)  11.14   12.26  12.91 
Tier 1 leverage (g) (required: 4.00%; well-capitalized: 5.00%) 10.05   10.48  10.81 
Tier 1 risk-based capital (g) (required: 6.00%; well-capitalized: 8.00%)  11.14   12.26  12.91 
Total Risk-based capital (g) (required: 8.00%; well-capitalized: 10.00%)  11.88   13.05  13.80 
          
          
Asset Quality Indicators:         
          
Nonperforming Assets:         
Nonaccruing loans$ 23,172  $14,581 $23,916 
Troubled debt restructuring (accruing)  14,182   14,070  13,616 
Assets acquired through foreclosure  3,232   2,935  3,299 
Total nonperforming assets$ 40,586  $31,586 $40,831 
          
Past due loans (h)$ 271  $720 $918 
          
Allowance for loan losses$ 39,028  $37,746 $36,412 
          
Ratio of nonperforming assets to total assets  0.61 % 0.54% 0.81%
Ratio of nonperforming assets (excluding accruing TDRs)  0.40   0.30  0.54 
Ratio of allowance for loan losses to total gross loans (i)  0.89   0.98  1.08 
Ratio of allowance for loan losses to nonaccruing loans  168   259  152 
Ratio of quarterly net charge-offs to average gross loans (a)(e)  0.44   0.11  0.70 
Ratio of year-to-date net charge-offs to average gross loans (a)(f)  0.20   0.07  0.36 
See "Notes"         
          


  
WSFS FINANCIAL CORPORATION 
FINANCIAL HIGHLIGHTS (Continued) 
AVERAGE BALANCE SHEET 
(Dollars in thousands) 
(Unaudited) Three months ended
  September 30, 2016   June 30, 2016   September 30, 2015 
  Average  Interest & Yield/   Average  Interest & Yield/   Average  Interest & Yield/ 
  Balance  Dividends Rate (a)(b)   Balance  Dividends Rate (a)(b)   Balance  Dividends Rate (a)(b) 
Assets: 
Interest-earning assets: 
Loans: (e) (j)                          
Commercial real estate loans$  1,264,882   $ 15,470  4.87 % $ 1,207,324  $14,952 4.98% $ 1,076,077  $12,630 4.69%
Residential real estate loans (l)   299,480     3,541  4.73     278,418   3,146 4.52    249,645   2,516 4.03 
Commercial loans   2,187,214     25,050  4.59     2,016,975   22,333 4.49    1,738,824   19,484 4.52 
Consumer loans   414,653     4,485  4.30     367,769   4,074 4.46    335,487   3,807 4.50 
Total loans (l)   4,166,229     48,546  4.65     3,870,486   44,505 4.64    3,400,033   38,437 4.54 
Mortgage-backed securities (d)   736,100     3,854  2.09     727,359   3,910 2.15    743,312   3,588 1.93 
Investment securities (d)   201,264     1,214  3.54     205,944   1,226 3.48    152,356   875 3.32 
Reverse mortgage loans   24,953     1,303  20.89     25,273   1,478 23.39    25,485   1,561 24.50 
Other interest-earning assets   35,033     420  4.80     32,465   384 4.73    31,346   396 5.01 
Total interest-earning assets   5,163,579     55,337  4.32     4,861,527   51,503 4.32    4,352,532   44,857 4.14 
Allowance for loan losses   (39,053)         (37,351)         (40,978)      
Cash and due from banks   122,561           96,784          88,855       
Cash in non-owned ATMs   600,821           510,684          415,652       
Bank owned life insurance   100,989           91,310          76,947       
Other noninterest-earning assets   241,370           207,305          156,487       
Total assets$  6,190,267         $ 5,730,259        $ 5,049,495       
                           
Liabilities and Stockholders' Equity:                          
Interest-bearing liabilities:                          
Interest-bearing deposits:                          
Interest-bearing demand$  855,052   $ 295  0.14 % $ 784,507  $254 0.13% $ 677,665  $162 0.09%
Money market   1,162,986     850  0.29     1,100,449   787 0.29    961,654   622 0.26 
Savings   494,482     180  0.14     436,929   113 0.10    400,275   52 0.05 
Customer time deposits   567,600     874  0.61     550,661   750 0.55    395,637   553 0.55 
Total interest-bearing customer deposits   3,080,120     2,199  0.28     2,872,546   1,904 0.27    2,435,231   1,389 0.23 
Brokered deposits   142,133     213  0.60     231,509   300 0.52    212,117   198 0.38 
Total interest-bearing deposits   3,222,253     2,412  0.30     3,104,055   2,204 0.29    2,647,348   1,587 0.24 
                           
FHLB of Pittsburgh advances   768,305     1,225  0.63     714,271   1,124 0.63    693,202   868 0.50 
Trust preferred borrowings   67,011     415  2.46     67,011   397 2.38    67,011   343 2.03 
Senior Debt   151,875     2,119  5.58     74,114   1,175 6.34    53,676   942 6.85 
Other borrowed funds   114,312     145  0.50     135,017   189 0.56    138,465   120 0.35 
Total interest-bearing liabilities   4,323,756     6,316  0.58     4,094,468   5,089 0.50    3,599,702   3,860 0.43 
                           
Noninterest-bearing demand deposits   1,151,240           981,033          895,711       
Other noninterest-bearing liabilities   54,686           48,543          48,405       
Stockholders' equity   660,585           606,215          505,677       
Total liabilities and stockholders' equity$  6,190,267         $ 5,730,259        $ 5,049,495       
                           
Excess of interest-earning assets                          
over interest-bearing liabilities$  839,823         $ 767,059        $ 752,830       
                           
Net interest and dividend income   $ 49,021        $46,414       $40,997   
                           
                           
Interest rate spread                          
        3.74 %       3.82%       3.71%
Net interest margin(n)                          
        3.84 %       3.90%       3.79%
                           
See "Notes"                          


               
 WSFS FINANCIAL CORPORATION             
 FINANCIAL HIGHLIGHTS (Continued)             
 (Dollars in thousands, except per share data)             
 (Unaudited)Three months ended Nine months ended 
  September 30,
 June 30, September 30, September 30,September 30, 
 Stock Information (o):2016  2016 2015 2016  2015 
                 
 Market price of common stock:               
 High$  39.31   $37.10 $29.15 $ 39.31  $29.15 
 Low   31.47    30.56  26.36   26.40   23.72 
 Close   36.49    32.19  28.81   36.49   28.81 
 Book value per share of common stock   22.08    20.89  18.46       
 Tangible common book value per share of common stock (p)   16.57    17.70  16.40       
 Number of shares of common stock outstanding (000s)   31,334    29,549  27,392       
 Other Financial Data:               
 One-year repricing gap to total assets (k)   (2.34)% 2.22% 3.55%      
 Weighted average duration of the MBS portfolio4.2 Years 3.6 years 4.3 years       
 Unrealized (losses) gains on securities available-for-sale, net of taxes$  11,084   $12,841 $4,543       
 Number of Associates (FTEs) (m)   1,082    1,017  893       
 Number of offices (branches, LPO's, operations centers, etc.)   77    76  55       
 Number of WSFS owned ATMs   447    447  452       
 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 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.       
(m)Includes seasonal Associates, when applicable.      
(n)Beginning in 2015, the annualization method used to calculate net interest margin was changed to actual/actual from 30/360.  All periods net interest margin calculations were updated to reflect this change.  
(o)All stock information has been adjusted for the 3 for 1 stock dividend completed on May 18, 2015.    
(p)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.  These non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP, and they are not a substitute for, or superior to, GAAP results.  For a reconciliation of these non-GAAP measures see pages 14 and 15 of this press release. 
   



               
 WSFS FINANCIAL CORPORATION             
 FINANCIAL HIGHLIGHTS (Continued)             
 (Dollars in thousands, except per share data)             
 (Unaudited)               
                 
 Non-GAAP Reconciliation (p):Three months ended Nine months ended
  September 30,  June 30, September 30, September 30,  September 30, 
  2016  2016 2015 2016  2015 
 Net interest Income (GAAP)$  49,021   $ 46,414  $ 40,997  $  140,791   $ 118,904  
 Less: FHLB Special Dividend   -     -    -     -     (808) 
 Core net interest income (non-GAAP)   49,021     46,414    40,997     140,791     118,096  
 Noninterest Income (GAAP)   26,849     24,849    21,665     74,768     65,218  
 Less: Securities gains   (1,040)   (545)   (76)    (1,890)   (1,004) 
 Core fee income (non-GAAP)   25,809     24,304    21,589     72,878     64,214  
 Core net revenue (non-GAAP)$  74,830   $ 70,718  $ 62,586  $  213,669   $ 182,310  
                 
                 
                 
 Noninterest expense (GAAP)$  50,497   $ 44,027  $ 38,705  $  137,723   $ 116,272  
 Less: Corporate Development Costs   (5,885)   (549)   (855)    (7,003)   (2,137) 
 Core noninterest expense (non-GAAP)$  44,612   $ 43,478  $ 37,850  $  130,720   $ 114,135  
                 
  End of period       
  September 30,  June 30, September 30,       
  2016  2016 2015       
                 
 Total assets$  6,627,593   $ 5,834,107  $ 5,067,942        
 Less: Goodwill and other intangible assets   (172,709)   (94,073)   (56,339)       
 Total tangible assets$  6,454,884   $ 5,740,034  $ 5,011,603        
                 
 Total Stockholders' equity$  692,010   $ 617,196  $ 505,617        
 Less: Goodwill and other intangible assets   (172,709)   (94,073)   (56,339)       
 Total tangible common equity (non-GAAP)$  519,301   $ 523,123  $ 449,278        
                 
 Calculation of tangible common book value per share:             
 Book Value per share (GAAP)$  22.08   $ 20.89  $ 18.46        
 Tangible common book value per share (non-GAAP)  16.57     17.70    16.40        
                 
 Calculation of tangible common equity to assets:             
 Equity to asset ratio (GAAP)  10.44  %  10.58 %  9.98 %      
 Tangible common equity to asset ratio (non-GAAP)  8.05     9.11    8.96        


   
 WSFS FINANCIAL CORPORATION 
 FINANCIAL HIGHLIGHTS (Continued) 
 (Dollars in thousands, except per share data) 
 (Unaudited)Three months ended       
    
 Non-GAAP Reconciliation (p): Nine months ended
  September 30,  June 30, September 30, September 30,  September 30, 
  2016  2016 2015 2016  2015 
 GAAP net income$  12,722  $ 17,478  $ 14,426  $  45,970  $ 39,549  
 Pre-tax Adjustments: Sec. gains, corp. dev. costs, & FHLB dividend   4,845    4    548     5,113    572  
 Tax Impact of Adjustments   (1,551)   -    -     (1,574)   -  
 Non-GAAP net income$  16,016   $ 17,482  $ 14,974  $  49,509  $ 40,121  
                 
 Return on Average Assets (ROA)   0.82 %  1.23 %  1.14 %   1.05 %  1.06 %
 Pre-tax Adjustments: Sec. gains, corp. dev. costs, & FHLB dividend   0.31    -    0.04     0.32    0.02  
 Tax Impact of Adjustments   (0.10)   -    -     (0.10)   -  
 Non-GAAP ROA   1.03  %  1.23 %  1.18 %   1.27 %  1.08 %
                 
 GAAP EPS$  0.41  $ 0.58  $ 0.51  $  1.50  $ 1.39  
 Pre-tax Adjustments: Sec. gains, corp. dev. costs, & FHLB dividend   0.15    -    0.02     0.16    0.02  
 Tax Impact of Adjustments   (0.05)   -    -     (0.05)   -  
 Core EPS (non-GAAP)$  0.51   $ 0.58  $ 0.53  $  1.61  $ 1.41  
                 
 Calculation of return on tangible common equity:             
 GAAP net income$  12,722  $ 17,478  $ 14,426  $  45,970  $ 39,549  
 Add: Tax effected amortization of intangible assets   158    300    303     813    813  
 Net tangible Income (non-GAAP)$  12,880  $ 17,778  $ 14,729  $  46,783  $ 40,362  
                 
 Average shareholders' equity$  660,585   $ 606,215  $ 505,677  $  619,766  $ 505,047  
 Less: average goodwill and intangible assets   (131,569)   (94,434)   (56,736)    (107,115)   (57,156) 
 Net average tangible equity$  529,016  $ 511,781  $ 448,941  $  512,651  $ 447,891  
                 
 Return on tangible equity (non-GAAP)  9.69%   13.97%   13.02%   12.19%   12.05% 
                 

 

WSFS Investor Relations Contact: Dominic Canuso (302) 571-6833 or dcanuso@wsfsbank.com WSFS Media Contact: Justin Dunn (302) 573-3235 or jdunn@wsfsbank.com

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