WSFS Financial Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

wsfs-20200930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-35638

WSFS FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

22-2866913

(State or other jurisdiction of Incorporation or organization)

(I.R.S. Employer Identification Number)

500 Delaware Ave,

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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

WSFS

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Number of shares outstanding of the issuer's common stock, as of the latest practicable date: 50,402,351 shares as of October 31, 2020.

WSFS FINANCIAL CORPORATION

FORM 10-Q

TABLE OF CONTENTS


	PART I. Financial Information	Page
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2020 and 2019	5
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2020 and 2019	6
	Consolidated Statements of Financial Condition as of September 30, 2020 and December 31, 2019	7
	Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months Ended September 30, 2020 and 2019	8
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	10
	Notes to the Consolidated Financial Statements for the Three and Nine Months Ended September 30, 2020	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	61
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	78
Item 4.	Controls and Procedures	78
PART II. Other Information
Item 1.	Legal Proceedings	78
Item 1A.	Risk Factors	79
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults upon Senior Securities	81
Item 4.	Mine Safety Disclosures	81
Item 5.	Other Information	81
Item 6.	Exhibits	81

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, and exhibits hereto, 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. The words “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project” and similar expressions, among others, generally identify forward-looking statements. 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:

•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 possible declines in housing markets, an increase in unemployment levels and slowdowns in economic growth, including as a result of the novel coronavirus, or COVID-19, pandemic;

•possible additional loan losses and impairment of the collectability of loans, particularly as a result of the COVID-19 pandemic and the policies and programs implemented by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, including its automatic loan forbearance provisions and the Company's Paycheck Protection Program (PPP) lending activities;

•the economic and financial impact of federal, state and local emergency orders and other actions taken in response to the COVID-19 pandemic;

•the Company’s level of nonperforming assets and the costs associated with resolving problem loans including litigation and other costs and complying with government-imposed foreclosure moratoriums;

•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 the Company's loan portfolio;

•the extensive federal and state regulation, supervision and examination governing almost every aspect of the Company’s operations and potential expenses associated with complying with such regulations;

•the Company’s ability to comply with applicable capital and liquidity requirements (including the effect of the transition to the Current Expected Credit Losses (CECL) methodology for allowances and related adjustments), including its ability to generate liquidity internally or raise capital on favorable terms;

•possible changes in trade, monetary and fiscal policies and stimulus programs, laws and regulations and other activities of governments, agencies, and similar organizations, and the uncertainty of the short- and long-term impacts of such changes;

•any impairments of the Company's goodwill or other intangible assets;

•conditions in the financial markets, including the destabilized economic environment caused by the COVID-19 pandemic, that may limit the Company’s access to additional funding to meet its liquidity needs;

•the intention of the United Kingdom's Financial Conduct Authority (FCA) to cease support of London Inter-Bank Offered Rate (LIBOR) and the transition to an alternative reference interest rate, including methodologies for calculating the rate that are different from the LIBOR methodology and changed language for existing and new floating or adjustable rate contracts;

•the success of the Company's growth plans, including its plans to grow the commercial small business leasing portfolio and residential mortgage, small business and Small Business Administration (SBA) portfolios;

•the successful integration of acquisitions;

•the Company’s ability to fully realize the cost savings and other benefits of its acquisitions, manage risks related to business disruption following those acquisitions, and post-acquisition Customer acceptance of the Company’s products and services and related Customer disintermediation;

Table of Contents

•negative perceptions or publicity with respect to the Company generally and, in particular, the Company’s trust and wealth management business;

•failure of the financial and operational controls of the Company’s Cash Connect® division;

•adverse judgments or other resolution of pending and future legal proceedings, and cost incurred in defending such proceedings;

•the Company's reliance on third parties for certain important functions, including the operation of its core systems, and any failures by such third parties;

•system failures or cybersecurity incidents or other breaches of the Company’s network security, particularly given widespread remote working arrangements;

•the Company’s ability to recruit and retain key Associates;

•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;

•the effects of regional or national civil unrest (including any resulting branch or ATM closures or damage);

•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, particularly as a result of the COVID-19 pandemic, 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;

•any reputation, credit, interest rate, market, operational, litigation, legal, liquidity, regulatory and compliance risk resulting from developments related to any of the risks discussed above; and

•other risks and uncertainties, including those discussed in other documents filed by the Company with the Securities and Exchange Commission (SEC) from time to time.

The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. The Company disclaims any duty to revise or update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company for any reason, except as specifically required by law.

As used in this Quarterly Report on Form 10-Q, the terms “WSFS”, “the Company”, “registrant”, “we”, “us”, and “our” mean WSFS Financial Corporation and its subsidiaries, on a consolidated basis, unless the context indicates otherwise.

Cash Connect® is the Company's registered trademark. Any other trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

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WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
(Dollars in thousands, except per share and share data)	(Unaudited)
Interest income:
Interest and fees on loans and leases	$	110,195	$	124,800	$	341,657	$	340,918
Interest on mortgage-backed securities	11,686		12,989		37,454		35,684
Interest and dividends on investment securities:
Taxable	435		29		552		79
Tax-exempt	830		939		2,648		2,963
Other interest income	224		2,505		797		4,098
	123,370		141,262		383,108		383,742
Interest expense:
Interest on deposits	8,346		16,851		32,815		43,916
Interest on Federal Home Loan Bank advances	445		1,099		1,900		4,495
Interest on senior debt	1,179		1,179		3,538		3,538
Interest on federal funds purchased	—		602		471		2,194
Interest on trust preferred borrowings	347		693		1,417		2,136
Interest on other borrowings	5		5		13		84
	10,322		20,429		40,154		56,363
Net interest income	113,048		120,833		342,954		327,379
Provision for credit losses	2,716		4,121		154,116		23,970
Net interest income after provision for credit losses	110,332		116,712		188,838		303,409
Noninterest income:
Credit/debit card and ATM income	7,251		13,115		27,916		38,307
Investment management and fiduciary income	13,266		10,459		35,157		30,988
Deposit service charges	4,772		6,139		14,594		16,988
Mortgage banking activities, net	11,507		3,152		23,472		8,090
Loan and lease fee income	1,165		823		3,381		2,358
Securities gains, net	3,322		—		5,923		78
Unrealized gains on equity investments, net	104		21,344		761		26,175
Realized gain on sale of equity investment	—		—		22,052		—
Bank owned life insurance income	591		277		1,011		877
Other income	7,193		7,037		20,126		22,478
	49,171		62,346		154,393		146,339
Noninterest expense:
Salaries, benefits and other compensation	48,772		48,914		142,875		133,669
Occupancy expense	8,152		9,085		24,114		24,262
Equipment expense	5,678		5,564		16,401		14,997
Data processing and operations expenses	3,198		3,861		9,337		10,180
Professional fees	4,611		3,180		13,634		7,967
Marketing expense	1,451		1,373		3,617		4,910
Loss on early extinguishment of debt	2,280		—		2,280		—
FDIC expenses	829		(227)		1,080		1,435
Loan workout and other credit costs	1,422		846		6,462		2,537
Corporate development expense	428		10,517		4,570		51,090
Restructuring expense	—		8,360		—		14,603


Other operating expense	16,719		18,088		51,101		49,351
	93,540		109,561		275,471		315,001
Income before taxes	65,963		69,497		67,760		134,747
Income tax provision	15,140		15,902		14,181		32,253
Net income	$	50,823	$	53,595	$	53,579	$	102,494
Less: Net loss attributable to noncontrolling interest	(322)		(287)		(1,382)		(611)
Net income attributable to WSFS	$	51,145	$	53,882	$	54,961	$	103,105
Earnings per share:
Basic	$	1.01	$	1.02	$	1.08	$	2.13
Diluted	$	1.01	$	1.02	$	1.08	$	2.12
Weighted average shares of common stock outstanding:
Basic	50,665,359		52,863,202		50,801,777		48,381,338
Diluted	50,684,493		53,054,368		50,832,085		48,668,460

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

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WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
(Dollars in thousands)	(Unaudited)				(Unaudited)
Net income	$	50,823	$	53,595	$	53,579	$	102,494
Less: Net loss attributable to noncontrolling interest	(322)		(287)		(1,382)		(611)
Net income attributable to WSFS	51,145		53,882		54,961		103,105
Other comprehensive (loss) income:
Net change in unrealized (losses) gains on investment securities available-for-sale
Net unrealized (losses) gains arising during the period, net of tax (benefit) expense of $(1,097), $2,911, $14,610 and $14,565, respectively	(3,474)		9,268		46,264		46,124

Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of $797, $—, $1,421, and $19, respectively	(2,525)		—		(4,501)		(59)
	(5,999)		9,268		41,763		46,065

Price	44.41	EPS	3
Shares	53	P/E	18
MCap	2,356	P/FCF	31
Net Debt	-580	EBIT	243
TEV	1,776	TEV/EBIT	7
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-11-04
10-Q	2020-06-30	Filed 2020-08-10
10-Q	2020-03-31	Filed 2020-05-08
10-K	2019-12-31	Filed 2020-03-02
10-Q	2019-09-30	Filed 2019-11-08
10-Q	2019-06-30	Filed 2019-08-07
10-Q	2019-03-31	Filed 2019-05-10
10-K	2018-12-31	Filed 2019-02-28
10-Q	2018-09-30	Filed 2018-11-08
10-Q	2018-06-30	Filed 2018-08-08
10-Q	2018-03-31	Filed 2018-05-10
10-K	2017-12-31	Filed 2018-03-01
10-Q	2017-09-30	Filed 2017-11-08
10-Q	2017-06-30	Filed 2017-08-08
10-Q	2017-03-31	Filed 2017-05-09
10-K	2016-12-31	Filed 2017-03-01
10-Q	2016-09-30	Filed 2016-11-09
10-Q	2016-06-30	Filed 2016-08-09
10-Q	2016-03-31	Filed 2016-05-06
10-K	2015-12-31	Filed 2016-02-29
10-Q	2015-09-30	Filed 2015-11-06
10-Q	2015-06-30	Filed 2015-08-07
10-Q	2015-03-31	Filed 2015-05-11
10-K	2014-12-31	Filed 2015-03-16
10-Q	2014-09-30	Filed 2014-11-10
10-Q	2014-06-30	Filed 2014-08-11
10-Q	2014-03-31	Filed 2014-05-12
10-K	2013-12-31	Filed 2014-03-17
10-Q	2013-09-30	Filed 2013-11-12
10-Q	2013-06-30	Filed 2013-08-09
10-Q	2013-03-31	Filed 2013-05-10
10-K	2012-12-31	Filed 2013-03-18
10-Q	2012-09-30	Filed 2012-11-09
10-Q	2012-06-30	Filed 2012-08-09
10-Q	2012-03-31	Filed 2012-05-10
10-Q	2011-09-30	Filed 2011-11-09
10-Q	2011-06-30	Filed 2011-08-09
10-Q	2011-03-31	Filed 2011-05-10
10-K	2010-12-31	Filed 2011-03-16
10-Q	2010-09-30	Filed 2010-11-09
10-Q	2010-06-30	Filed 2010-07-30
10-Q	2010-03-31	Filed 2010-05-10
10-K	2009-12-31	Filed 2010-03-16

8-K	2020-11-23
8-K	2020-11-04
8-K	2020-10-22
8-K	2020-09-22
8-K	2020-08-18
8-K	2020-07-23
8-K	2020-06-16
8-K	2020-05-20
8-K	2020-05-04
8-K	2020-04-27
8-K	2020-04-23
8-K	2020-04-10
8-K	2020-01-31
8-K	2020-01-21
8-K	2019-11-12
8-K	2019-11-05
8-K	2019-10-21
8-K	2019-08-20
8-K	2019-08-12
8-K	2019-08-02
8-K	2019-07-22
8-K	2019-07-09
8-K	2019-05-06
8-K	2019-04-30
8-K	2019-04-25
8-K	2019-03-13
8-K	2019-03-05
8-K	2019-03-01
8-K	2019-02-27
8-K	2019-02-13
8-K	2019-02-12
8-K	2019-01-22
8-K	2018-12-26
8-K	2018-12-13
8-K	2018-12-12
8-K	2018-11-29
8-K	2018-11-06
8-K	2018-10-31
8-K	2018-10-22
8-K	2018-09-18
8-K	2018-09-13
8-K	2018-08-15
8-K	2018-07-23
8-K	2018-07-11
8-K	2018-05-02
8-K	2018-04-26
8-K	2018-04-26
8-K	2018-04-23
8-K	2018-02-27
8-K	2018-01-30
8-K	2018-01-22
8-K	2018-01-04

EX-31.1	a302certification-ceo09302.htm
EX-31.2	a302certification-cfo09302.htm
EX-32	a906certification09302020.htm

WSFS 10Q Quarterly Report

WSFS Financial Earnings 2020-09-30